uCloudlink Group Inc.

Hello and welcome to the uCloud Link Group Inc. Third Quarter 25 Warnings Conference Call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing star and then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, please press star and then do. Please note that this event is being recorded. I would now like to turn the conference over to Daniel Gao, Investor Relations of UCAO Link. Thank you, and over to you.

Hello, everyone. Thank you for joining us on UCAO Link's third quarter, 2025 Earnings Call. The earnings released and our earnings presentation are now available on our IR website at ir.ucalolink.com. Joining me on today's call are Mr. Chi Ping Peng, Co-Founder and Chairman of the Board of Directors, Mr. Chao Hui Chen, Co-Founder, Director and Chief Executive Officer, and Mr. Yi Meng Shi, Chief Financial Officer. Mr. Chen will begin with an overview of our recent business highlights. Mr. Shi will then discuss our financial and operational highlights for the quarter. They will all be available to take your questions in the Q&A section that follows. Before we proceed, please note that this call may contain forelooking statements made pursuant to the safe harbor provisions of the previous Secretary's Legation Reform Act of 1995. These forelooking statements are based on measurements, currents, expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the component's control, which may cause actual results, performance, or achievements of the component to be massively different from the results, performance, or expectations projected or included by these forward-looking statements. All forward-looking statements are expressly qualified in their entity by their cutinary statements, risk factors, and the details of the company's feelings with the SEC. The company does not assume any obligation to reverse or update any forward-looking statements as a result of new information, future events, change in market conditions, or otherwise accept as required by law. Please also notice that UCloudLink's earnings press release and this conference call include discussions of unaudited GAP financial information and unaudited non-GAP financial measures. UCloudLink's press release contents are a reconciliation of the unaudited non-GAP methods to the most directly comparable unaudited GAP methods. I will now turn the call over to Mr. Chen. Please go ahead.

Thank you, Daniel. Good morning or evening, everyone. Amid a complex microeconomic and trade environment, we remain disciplined in our execution while maintaining operational profitability. This balanced approach allows us to successfully navigate these external challenges and reinforce the resilience of our business while also laying the foundation for long-term value creation. We remain profitable and continue to generate stable margins with total revenue of U.S. dollar 21.1 million and the net income of U.S. dollar 9.3 million during the quarter. Our global mean ecosystem is gaining momentum as it grows in scale and global user adoption. Likewise, our 1.0 international data connectivity services business continues to grow with full-speed 5G network coverage across 91 countries and regions as we continue to gain market shares and reinforce our leadership position in the global low-mean sector. we remain focused on overcoming the world's first three fundamental digital dividers through the transformative connectivity solutions. Firstly, we are eliminating the global connectivity divide by breaking down international long mean barrier and providing seamless network access worldwide. Through our patent CloudSync and HyperCon technologies, we tackle the single multi-network divide by enabling intelligent and optimized connectivity across multiple networks. Lastly, the most innovative way, we are bridging the emotional digital divide with our AI power pack technology. creating entirely new and meaningful connections between humans and their past. Building on this mission, our strategy investment in R&D and marketing to accelerate innovation, enhance user experience, and speed up commercial civilization of our three new growth engines are yielding strong results. Our three new product line, Glaucoma Life, Glaucoma Thin, Glaucoma IoT, saw remarkable year-over-year MAU growth during the quarter, increasing 382.3%, 188.2%, and 593.3% respectively. Feedback has been overwhelmingly positive. reflecting how our solution directly address the market demand and validating our investment strategy. I will now reveal the highlights for each of our key business lines. I will start with our global in life business line. In the third quarter of year 2025, the average monthly active terminal reached 3,903. representing an increase of 408.2% year-over-year. Within our broader Grow Communal Life portfolio, which includes our industry-first Unicor Plus, Unicor Pro, and Long Plug, MAT grows by 369.3%, excluding platform year-over-year. reflecting strong user adoption across these innovative guidelines. Building on this solid foundation of product excellence, I will now highlight the significant progress we made with our flagship product, PetPhone. Designed to bridge the digital divide between humans and their pets, PetPhone is already gaining the momentum after its initial commercial launch in September 2025 in Hong Kong, and across the Middle East, where it has already generated orders for approximately 40,000 units, as we continue to expand our distribution channels and partners. At the IFA year 2025 in Berlin, Headphone was recognized as an all the need in the communications and connectivity catalog of the inaugural IFA Innovation Awards. It also received the best of IFA Year 2025 Distinctions from Young Co-design, Home Cookers, and Mark Dilley's Reviews. Following the showcase of our solutions at the IFA Berlin 2025, we are now in advance discussions with several major retail channels, including one key partners. Furthermore, we successfully entered into a partnership with a leading online retail platform in North America, where initial product shipment has already begun. With the strategy being established across Hong Kong, the Middle East, North America and Europe, we plan to establish a new operational structure and raise additional capital to accelerate the global expansion of our tech business. We also plan to develop tech as a state-of-the-art application that extends beyond smart hardware and build a comprehensive, systematic platform integrating social, entertainment, living stream, and a comprehensive pet ecosystem. The initial version of this new app is expected to launch in the first quarter of year 2025. Our GoKomi IoT business maintains a strong growth strategy trajectory with user adoption and revenue contribution showing substantial year-over-year improvements. In the third quarter, every month active terminals for Glucamine IoT record a year-over-year increase of 583.0%. We secure order for in-car infotainment system, while our initiatives in the Secretary-General sectors are now fully deployed and enter a phase of expansion, supported by broadened partnerships across several high-growth verticals, having established an initial presence in these key sectors. we plan to expand our solution into additional industry in the future. Turning to our glaucoma theme business now, over the past nine months, glaucoma theme has surpassed 400,000 cumulative cars sold, including OTA theme, e-theme, and e-theme trio. a game-changing solution demonstrating clear technology leadership in the industry. The eSIM field was named as a Best of IFA Year 2025 by Mark Ely's reviews, further highlighting its innovation and market recognition. This momentum has fueled our growth. driving at 269.5% year-over-year increase in average month active terminal during the third quarters. The eSIMTree solution has continued to gain strong traction following the widespread distribution of 10,000 trial units under a pilot program. It generates a positive user feedback and at more than 75% in user registration and more than 30% in active engagement, validating both our carrier partnership model and product market fit. Our carrier insurance program has also made significant progress. We have complete pilot negotiations with multiple operators and expect to commence joint testing and pilot initiatives in the coming quarters, laying the groundwork for future large-scale carrier partnerships. Lastly, our Glocomi Mobile 6 broadband business remains stable, with growing order momentum expected to provide a stable foundation of our future growth. The launch of our MioGo G40 Pro and the cutting-edge MioGo G50 Max are expected to serve as growth engines for the coming quarters. The MioGo G40 Pro is a revolutionary upgrade and a milestone product, enabling users to stay connected through one single device and one account. The product began deliveries by the end of the quarter and is the world's first device to support in-flight Wi-Fi and connect seamlessly across several usage scenarios such as home, airports, offices, and cafes. With the Mirgo G40 Pro, we are transforming portable connectivity from an international travel-only solution into a true multi-scenario companion. Powered by our patent AI HyperCon technology, it similarly serves users through one single intelligent device and one account, regardless of where they are. HyperCon, our industry-leading solution, also lays the foundation for larger-scale product iteration and future upgrades. Furthermore, we will launch the Mirgo G50 Max with sky-to-ground 5G satellite integration and AI-driven network switching, further solidifying our innovative leadership in the mobile fixed broadband industry. This device also enhances network quality through AI-powered real-time congestion detection, delivering a faster and more reliable user experience. Looking ahead, We are entering the next phase of expansion, where we will scale our global user base, further diversify our revenue streams, drive innovation across our ecosystem, and sustain a healthy financial performance. The launch of Mirgo G40 Pro and cutting-edge Mirgo G50 Max, combining with the launch of the platform, The strong validation of the ETHIN TRIO pilot, the robust expansion of our IoT solutions provides us with several robust growth engines going forward, laying a solid foundation for future growth. Having successfully navigated external challenges, we are confident in our ability to scale our user base. expand our global partnership and delivery growth in the coming years as we continue to innovate and bridge digital divides for users worldwide. We are confident that we have the right strategy in place to generate sustainable growth in the coming quarter. For the first quarter of the year 2025, we expect total revenues to be between US dollar to US dollar 26.5 million, representing a decrease of 15.4 to an increase of 1.9 compared to the same period of year 2024. For the four years of year 2025, We currently expect revenue to be in the range of U.S. dollar 81.3 to U.S. dollar 85.8 million. The company is revising its guidance in light of the persistent microeconomic challenges and global trend headwinds, which have set and may continue to have a border impact across the industry. I will now turn the call over to Mr. Chen.

Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the third quarter of 2025. Average Daily Active Terminal and Average Monthly Active Terminal are important operating metrics for us. are the measured customer usage trends over the periods and are reflective of our business performance. In the third quarter of 2025, average DATs were 332,674, of which 21,484 owned by the company and 311,190 not owned by the company. We presented an increase of 3.8% from third quarter of 2024. During this third quarter of 2025, 57.3% of DATs were from EuclidLink 1.0 international data connectivity service, and 42.7% were from EuclidLink 2.0 local data connectivity service. In September 2025, the average daily data usage per terminal was 1.57 gigabytes. Starting from this quarter, we are disclosing our average daily active users, EAU, and monthly active users, MAU, which represent the average number of unique users engaging with our Glocomy service on a daily and monthly basis respectively. We believe this matrix will better reflect the progress we are making in driving user engagement across our different business lines and how we are managing and monetizing our user basis as we scale up. Growth in average DAUs and MAUs follow similar patterns with a strong momentum. Average MAUs in the third quarter were 761,586 representing an increase of 11.9% from 680,609 in the third quarter of 2024. Average MAUs from Glocomi IoT, Glocomi Sync, and Glocomi Live Business saw increase of 593.3%, 188.2%, and 382.3% respectively from the same period last year. Average MAUs from Glocomi Mobile and Fixed Broadband Business decreased slightly by 0.8% year-over-year. On September 30, 2025, the company had 201 patents with 168 approved and 33 pending approved. Approval of Simcar was from 392 MNOs globally as of September 30, 2025. Total revenue for the third quarter of 2025 was $21.1 million, representing a decrease of 16% from $25.2 million in the same period of 2024. Revenue from service was $17 million in the third quarter of 2025, representing a decrease of 1.4% from $17.3 million in the same period, 2024. Revenue from service contributed 80.6% of the total revenue during third quarter, 2025, compared to 68.6% in the same period last year. Geographically speaking, during third quarter, 2025, Japan contributed to 33.2%, Mainland China contributed 35.1%, North America contributed 15.4%, and other countries and regions contributed the remaining 16.3% compared to 46.6%, 27.8%, 12.8%, and 12.8% respectively in the same period, 2024. Our gross profit was $11.3 million in the third quarter of 2025 compared to $12.2 million in the same period, 2024. Overall gross margins in the third quarter of 2025 further rose to 53.6% from 48.4% in the same period of 2024. The gross margins on service was 36.6% in the third quarter of 2025. compared to 60% in the same period of 2024. Excluding share basis conversations, total operating expenses were $11.1 million or 52% of total revenue in the third quarter of 2025, compared to $9.7 million or 39% of total revenue in the same period in 2024. Net income in the third quarter of 2005 was $9.3 million, compared to $3.4 million in the same period of 2024. Just EBITDA was $1.4 million in the third quarter of 2025, compared to $4.4 million in the same period of 2024. For the third quarter of 2025, we recorded an operating cash outflow of $0.9 million, compared to an operating cash inflow of $2 million in the same period of 2024. For the third quarter of 2025, our capital expenditures were $0.5 million, compared to $1.1 million in the same period of 2024. We maintained a solid balance sheet with a cash equivalent of $28.5 million as of September 30, 2025. compared to $30.1 million as of December 31, 2024. With that, operators, let's open it up for Q&A.

Thank you. We will now begin the question-answer session. To ask a question, you will press star and then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble a roster. We have the first question from the line of Vivian Zhang from Diamond Equity Research. Please go ahead.

Hello. Thank you for taking my question. So firstly, could you share with us the sources of this $9 million in other income and how it was identified? Was it a one-time payment?

Yeah. As we disclosed, the $80 million is a gain from the fair value of other investments. That's a change of fair values in the count.

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

Yeah. In the third quarter, the sales of product decreased 4 million US dollars in total. This is split into two parts. One part is 2.6 million US dollars sales decreasing from the product related data. which is a very low margins product. So for the third quarters, for this very low margin product, the amount, the sold amount, quite low compared with last year's. The second part is the sales terminus decreasing 1.1 million. which we mentioned is a Japanese customer delay the two MPBs orders, one is related to the 5G's portable Wi-Fi, one is related to the 4G's mobile Wi-Fi hotspot. This order will be, we expect, will be coming in the fourth quarter, so that's a delay, a little bit delay in terms of periods. But as we disclose, the DATs and MATs, DAU and MAUs, all increasing the increases compared with last year's. That means that the number of the terminals, other than the mobile broadband, the volumes of the new business, our gloomy life, our gloomy IoT and gloomy scene, so increasing dramatically compared with last year's. This operation metrics shows that a couple of times increased growth compared to the same period last year. But the revenues, contributions in terms of proportions are small to account. In terms of the pricing of the terminal, the live series product pricing is quite a small proportion compared with 5G portable Wi-Fi. So that's quite a much difference. So even we sell more volumes of a new product terminal to the market, but convert to the revenue, the revenue is smaller, but our users' numbers grows as we disclose. So we overrule more than 10% of the user number in terms of the MAU increases compared with last year's. So we believe this will contribute our future growth in terms of service next year for this growth of user spaces. Thank you.

I have some more comments because the hardware, because of tax and I think the trading headwind, so the customer, I think the I think more I'd say about microeconomic and the decision will be, the decision material will be longer than normal. Normally about 30 days, now go to maybe two months. That's what I call the delay, but the order is still coming. So that's first. And the second, hardware, I think because the high-value hardware, like 5G, our ship volume is delayed. that cause the impact of the total revenue number. But unfortunately, we have more user number, like for SIM, eSIM, and these live products. Then we generally, even the hardware cost is lower, it's smaller, but I think the contribution for the data. will increase in the future because monthly and yearly, they have to pay the same usage for the data.

Okay, got it. Thank you. That makes sense. And my... Hello, can you hear me? Okay, my next question is that mainland China, the revenue from mainland China has increased a lot and become the largest market. So what are the main drivers behind that?

Yes, as we disclose, the Euclidean 1.0 revenue in the National Data Connectivity Service always increases over the years. The main driven is from the Chinese outbound traveler contribute to use our roaming man branding service. So that's the main driven for our Eukalink 1.0 bonus growth in this year. So since the pandemic COVID-19, the Chinese outbound travel bonus is in the recovery over the past couple of years. So our revenue related to this part is on the recovery trend. So we believe this growth from the traveling sectors is on the growth track in the future as well.

I have more comments about the Chinese revenue increase. There are three reasons. The first is our 5G market share higher. And 5G, our revenue, including the total revenue in China, our percentage is much higher than last year. That means our 5G quality and leadership was recognized by the users. So here, because in China, 5G is more popular. Once the people use the 5G, They don't want to use the 4G. And we are leading. We cover 91 countries, and it's far more advanced than the other carriers. And speed side also, we are far more fast, and the coverage is much better. So that's the market share for 5G. We are higher growth fast, the first. Second, we have more products available in China. We are first to launch our... traditional 5G we are innovating to get more market share and more good technology for 5G. But we have more products like Lime and like our SIM card and our eSIM trill, this new product. So we can cover more, you know, business. In the history, we haven't entered this part. You know, like for the roaming market, we only occupy the Wi-Fi. Currently, we have eSIM. We have . We have . This part, I think we are now, we have more product and the more convenient product, not only just high quality, but also more convenient product available, and we enter this new segment. So here is 80% of the new market we never touched before. So we believe in the future. I think our market share in China will keep increasing and our SIM cards and eSIM trills will gain more market share in the one-person or two-person outbound travel market. And finally, I think the last point is about in China, I think we should be more market share and more revenue in Q3. If without, I think, I wonder the total, I think, the Chinese people travel outside in this summer, still suffer from like in Japan, you know, like earthquake, and also some unstable economic situation. So, you know, during the September, during the July and June, is the most difficult period I know the trade war with the U.S. All this impact. So I think once this economic situation becomes more stable, I think we will get more market share in this part.

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

Yeah. If you look at this trade war, I would believe there is some limited impact for our business, especially for our new business. Say, pay the phone, we have a new launch in U.S. market. a corporation with a leading paid online retailer. The name we know is a big name, Chewy. So we are new product solutions have entered into a US big channel, say Walmart and other famous channels as well. When more and more of the Tier 1 channels has our product on the shelf, I believe the U.S. market shares, we sell more products into the U.S. market. And the U.S. market says revenues contribution will gain and growth in the future, and that's what our beliefs that U.S. markets will be growing in the future?

I have more comments about these questions. First, our traditional mobile broadband business. I think we can see it is suffering from the microeconomic and also the trade world. But I think now it's getting stable and we see the customer now is our customer in Japan, in China. So for the mobile broadband business, now the order is coming in the fourth quarter. So we can see now the best period is over. From the current situation, we believe it will go better. That's from our traditional mobile business. For the new business, it's going very well. So most of our new products are launched in Q3. For example, our platform launched in September. In our G40, our one-account, one-device, hyper-account, multi-purpose, multi-scenario device, also the new function we launched at the end of the third quarter. So majorly in the third quarter, our new product, new solution launched in this quarter. So I think the feedback from the end user and from channel is quite positive as our mentioned disclosure in the information. So we get a big order for platform. So the fourth order is... It's 40,000 units, so it's much bigger than our expectation. Our SIM card gets feedback from the end user. It's very positive. I just mentioned about 10,000 pilots. We get very good feedback for the quality and the convenience. And in technology, we prove we are in a leading position. This is innovation, a super thing for the people, for a permanent second thing. We prove this concept. And also, we get very positive operation data. The register rate is about more than 75, and the active rate is about more than 30%. That means this very high percentage of users will increase in our future DAT and MAU. We add more value to our business. So I think also IoT, you can see we have faster growth. Even the smaller, the foundation is smaller, but every month we have more than 30% increase compared to every month. It's like less. So it's now for the car play market and the camera market. So we almost cover all the bigger tier one players. So we believe we will get more, you know, fast growth in the coming months. So I think for the platform, for SYNC, And for our last product, IoT, these new three new programs get a very good potential. So I believe in the coming quarter, we will get a better revenue than Q3 and Q2. And this year we believe once we – because we have an investment in the marketing and R&D, we spend – and that's why you can see this year campaign we started, we spent more than $3 million more than last year in the marketing campaign and R&D. And this will generate, I think, the good, you know, increase in the future. Thank you.

Okay, okay, I see. Okay, thank you for the detailed information. That's all my questions.

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

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

Now, as we disclosed in the PR a month ago, one Middle East tier one channel who ordered 30,000 units paid a phone into the Middle East market. That accounts for 70 percent something of the 40,000 units. Yeah, the remaining were sold to the U.S. market. But I believe more telephone units will be sold to the U.S. market when we launch. launch campaigns with trees and Walmart, these tier one channels in the near future.

We believe the U.S. is the biggest pet market and we also believe that I think we are bridging the digital gap between the people and the pets. I think it's far more than just a tracker, just a CCTV, just a single direction to monitor and manage a pet. So we are providing a mutual call, a mutual communication between the people and pets. But the problem is we need to, I think, more education for this opportunity like iPhone many years ago. We used to leave iPhone, changing the mobile internet in the world. And now people, to convince people and let people know the dog and pet can use the phone and the social like people. So we are very confident about that, but we need to get more campaign and more marketing spending in the U.S. and the rest of the world. That's why we try to separate these business to try Because the initial data for just more than one month get this about 40,000 order. I think 30 is come from the Middle East and another 10,000 come from U.S. All this data, I think, give us confidence. We want to more and have it invest in R&D side and also in marketing campaign in the U.S. and worldwide.

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

Yes. So in-car infotainment, so majorly I think for traditional oil car, these in-car infotainment, majorly comes from the Chinese providers. We almost cover all these providers. That means the new generation all use our solution. We already integrated. our solution into this provider. They majorly provide in the North American, Latin American, and also the Middle East and the Europe market. So I think we almost cover all the provider from the number one, number two, almost to number 17. So we already finished these initial presence and impact with them. So we can see the fast growth for in-car, for like a car plate, like the in-car import attainment. I think this will give us a huge increase and huge revenue in the future.

Thank you very much.

Thank you. This concludes the question and answer session. I would now like to turn the conference back to Daniel 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 colleagues' investor relations through the contact information provided on our website or speak to our investor relations form, Criticism Adversary. We look forward to speaking with you all again on our next quarterly call. Thank you.

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

Thank you.