Ucloudlink Group Inc (UCL) Q1 2025 Earnings Call Highlights: Revenue Growth Amidst Margin Pressures

GuruFocus News

Thu, May 22, 2025, 1:03 AM 4 min read

Total Revenue: USD18.6 million, a 3.4% increase from USD18.1 million in Q1 2024.
Service Revenue: USD14.2 million, a 4.9% increase from USD13.5 million in Q1 2024.
Gross Profit: USD9.7 million, a 3.1% decrease from USD10 million in Q1 2024.
Overall Gross Margin: 51.7%, down from 55.2% in Q1 2024.
Service Gross Margin: 57.3%, down from 65% in Q1 2024.
Product Sales Gross Margin: 34.3%, up from 26.2% in Q1 2024.
Operating Expenses (Excluding Share-Based Compensation): USD9.9 million, 53% of total revenue, up from USD8.5 million, 47% of total revenue in Q1 2024.
Adjusted Net Income (Non-GAAP): USD0.4 million, down from USD1.3 million in Q1 2024.
Adjusted EBITDA: USD1.4 million, down from USD1.7 million in Q1 2024.
Operating Cash Flow: USD0.2 million, down from USD1.9 million in Q1 2024.
Capital Expenditure: USD0.3 million, down from USD0.6 million in Q1 2024.
Cash and Cash Equivalents: USD31.1 million as of March 31, 2025, up from USD30.1 million on December 31, 2024.

Warning! GuruFocus has detected 3 Warning Signs with UCL.

Release Date: May 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Ucloudlink Group Inc (NASDAQ:UCL) reported a total revenue of USD18.7 million for Q1 2025, marking a 3.4% increase year over year.
The company maintained a strong financial position with a net income of USD0.4 million and a positive operating cash flow of USD0.2 million.
Ucloudlink's international data connectivity services business continues to grow robustly, with 5G network coverage now available in 90 countries and regions.
The company showcased innovative solutions such as the eSIM Trio, CloudSIM Kit, and PetPhone at MWC Barcelona 2025, generating significant interest.
Ucloudlink plans to begin regular disclosure of key metrics, including user account numbers segmented by business lines, starting Q3 2025 to enhance transparency.

Negative Points

The average daily active terminal (DAT) decreased by 0.3% compared to the first quarter of 2024.
Overall gross profit decreased by 3.1% to USD9.7 million, with the gross margin dropping from 55.2% in Q1 2024 to 51.7% in Q1 2025.
The gross margin on services declined from 65% in Q1 2024 to 57.3% in Q1 2025.
Total operating expenses increased to USD9.9 million, representing 53% of total revenue, up from 47% in the same period of 2024.
Adjusted net income (non-GAAP) decreased to USD0.4 million from USD1.3 million in the first quarter of 2024.

Q & A Highlights

Q: Can you provide insights into the regions or demographics expected to be early adopters of the PetPhone product? A: Daniel Gao, Director of Investor Relations, explained that the PetPhone was first announced at the Barcelona exhibition, generating significant interest. The product will be commercially launched at the end of May. There are three main types of users: pet channels in Europe and Asia, mobile virtual operators, and traditional electronic channels. The company is in advanced commercial discussions with several partners, expecting to close deals in Q2.

Q: Are the changes in tariffs between the US and China impacting your business? A: Yimeng Shi, Chief Financial Officer, stated that there are no current implications from tariff barriers between the US and China. The company has stock products in the US and outsourcing manufacturers in other countries, avoiding tariffs. The US market is seen as a growing opportunity for new business lines like PetPhone and IoT solutions.

Q: What is causing the increase in the cost of services, and are there measures to control this cost? A: Yimeng Shi noted that the cost of services increased due to a shift in sales categories, particularly the rise in outbound roaming services for Chinese travelers. The company has also increased expenditures on sales and marketing for new business lines, which is expected to bring future revenue growth. The daily active terminal numbers for new business lines are projected to increase significantly.

Q: Can you provide information on the areas of collaboration expected in the coming months? A: Daniel Gao highlighted that partnerships are expanding beyond traditional data and mobile broadband to include carriers and mobile virtual operators interested in the company's SIM solutions. The PetPhone product is also attracting interest from carriers, creating new revenue opportunities. The company is in discussions with several partners and expects to close deals soon.

Q: How are you addressing the challenges faced by MVNOs and mobile network operators with your new SIM technology? A: Daniel Gao explained that the new SIM technology enhances both domestic and international coverage, addressing poor network performance and limited international roaming. It empowers tier 2 and tier 3 operators to deliver superior services and expand their market reach, offering enterprise-grade security and global coverage at competitive prices.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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