Euclid reports Q2 revenue of $19.4M, revises full-year guidance down while showcasing transformative growth in IoT and SIM services with impressive user metrics.

OPERATOR - (00:01:06)

Good day and welcome to the Ucloudlink Group 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 two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Daniel Gao. Please go ahead, sir.

Daniel Gao - Operator - (00:01:53)

Hello everyone and thank you for joining us on Ucloudlink Group second quarter 2025 earnings call. The earnings release and our earnings presentation are now available on our IR website at ir.ucloudlink.com Joining me on today's call are Mr. Zhi Pingpeng, 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 questions if in the QA section that follows. Before we proceed, please note that this call may contain forward looking statements made pursuit to the safe harbor provisions of the appropriate securities Litigation Reform act of 1995. These forward 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 materially different from the results, performance or implications implied by these forward looking statements. All forward looking statements are expressly qualified in their end state by their by the conditional 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 except as required by law. Please also note that Ucloudlink Group's earning press release on this conference call include discussions of unauthed Gap financial information and unaudit non gap financial matters. You Claudian's press release contains a reconciliation of their unaudited non-GAAP methods to their most directly comparable undoubted GAP measures. I will now turn the call over to Mr. Chen. Please go ahead.

Mr. Chen - (00:04:35)

Thank you Daniel and good morning or evening everyone. We are accelerating three transformative growth lines. GlocalMe Live lead by Platform Glaucomin sim powered by eSIM Trio and GlocalMe IoT through focused investment in R and D. Go to market capabilities and brand building to drive sustainable market expansion while simultaneously streaming our legacy global mobile broadband business line by proactively offsetting tariff impact through strategy, supply chain and adjustments. Throughout this expansion, we maintain financial health as our foundation, ensuring disciplined investments drive sustainable profitability and laying a solid foundation for sustainable long term value creation. Our global ecosystems continues to gain traction and growth momentum. Our business remains profitable and continue to generate a stable margin with total revenue of US$19.4 million and net income of US$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 loan sector. Our substantial strategy investment focus on R and D and marketing for our next generation product to ensure they drive growth and improve our performance. Once launched, the development, refinement and testing of these products progress smoothly with several major distributions partner as we build a robust pipeline and enter a final stages commercialization feedback has been overwhelming positive reflecting how our solutions directly address the market demand and have validated our investment strategy. This has set the stage for the launch of several groundbreaking products in the near future. In this quarter's earning release we have introduced a new metric average month Active terminals mat. Our three new product line GlocalMe Lite, GlocalMe Thin and the GlocalMe IoT demonstrated remarkable MAT growth of 105.2%, 120.1% and 789.0% year over year respectively. I've now reviewed highlights for each of our key business lines. I will start with GlocalMe Live Business line, the upcoming commercial launch of the platform where we already have over 20 potential strategy partners lineup and we launch and the 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 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 stream through our value add services. Our technology amplifies their market research and their infrastructure accelerate our scale. We also make substantial with a leading global online pet retailer to further enhance PetForm's accessibility and market penetration within a short time. Alongside PetForm, our industry first Unicorn Plus and Unicorn Plus series which are highly competitive, innovative and pioneering products integrating seamless connectivity across multiple networks. 6 Tech, global partitioning and fast charging capabilities, we have further strengthened our competitive edge in the travel, automotive and secure networking markets. Commercial application of our GlocalMe 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 increase 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 Partner with more Industry leader in battery monitoring, desk cams, vehicle information infotainment and the smart security camera sectors are accelerating our expansion into high growth verticals, further consolidating IoT as a key pillar for our business. Turning to our global mixing business line, our success is an accident. It is a result of a successful business evolution. We have Already sold over 300,000 OTA SIM and ESIM unit 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 corridor. This operational maturity these operational maturity positions are distinctly from market entrance. Building on this foundation Eastern Trail represents our second most advantageous realized while competitors remain focused on a legacy SIM or ESIM technologies, we had once to redefine industry standards through this innovation, eSIM3 has been recognized as a transforming transformative solution, receiving the top NWC Innovation Award from the SAS Guild, its groundbreaking capabilities generating significant industry 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 Trio Executive in a partnership with top media outlets substantially increase its market visibility and exposure. We are synergistically addressing two critical pain points for the industry with this product. First as the ultimate permanent secondary theme for consumers, it ensures seamless global coverage by dynamically connecting to multiple networks, eliminating the need for costly international roaming and providing user with reliable high speed connectivity across devices. Secondary through our Carrier core Insurance program which 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 buying power. With nearly 1,000 trial units distributed, strong user feedback kit prestos in carrier partnership programs and the simple car production and the testing with multiple operator schedule for next quarter, we poised to begin large scale commercial deployment during the third quarter with strong confidence. Lastly, our gocomin Mobile fixed ball business line we pilot launched the upgraded MiFi G40 Pro late in the second quarter with the supposed speed three times faster than traditional 4G devices. It will first enable in flight WI Fi and connect to wi fi network across several application scenarios such as Home, Apple Office and CAFES. With MiFi G40 Pro we are transforming portable connectivity from international travel only solution to a true multi scenario companion with our patented AI Hypercon technologies. Seamlessly serving saving use simulates saving user through as a single intelligent device and one account regardless where they are. Furthermore in the third quarter we will launch the MiFi G50 Max with the sky to ground 5G satellite integration and AI driven network switching, further solidifying our innovative leadership in the mobile phase broadband industry. This device enhances network quality through AI power, real time congestion detection and the network reselecting. In summary, we are ideally positioned to capitalize our strategy and operation momentum despite trade and macroeconomic headwinds, we remain committed to executing our strategy R and D and marketing investment for new products while sustaining a healthy finance performance. These three products from our core business line Glucomythene led by eSIM Trio, Glaucoming Line, Encode by platform and GlocalMe IoT have all achieved successful transformation in the second quarter, laying a solid foundation for future growth with the potential to each real multi million of users in the future. Our diversifying product portfolio provides multiple pathways for us to drive growth throughout the remainder of the year. 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 US$22.0 million to US$26 million, representing a decrease of 12.7% 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 two year 2025 to be the range of US$85 million to US$95 million as compared with a range between US$95 million to US130 million. As previously announced, the Company is revising its guidance in light of the present macroeconomic challenges and the global trade headwinds which have had and may continue to have broader impact across the industries. Now I will turn the call over to Mr. Hsi.

Mr. Shi - (00:19:19)

Thank you Mr. Chen. Hello everyone. I will go over operational and financial highlights for the second quarter of 2025. Average daily active terminall and average monthly active terminall mat are important operating metrics for US as measures customer usage trend over the period and is reflective of our business performance. In the second quarter of 2025, average DATs were 317,000 and 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 second quarter of 2025, 55.7% of DAT were from Equalink 1.0 International Data Connectivity Service and 45.3% were from GlocalMe 2.0 Local Data Connectivity Service. In June 2025, the average daily data usage per terminal was 1.59. Average monthly active terminall MAT in the second quarter were 663,197, representing an increase of 5.6% from 628,000 and 125 in the second quarter of 2024. First average math in the second quarter of Globalme IoT business was 42,095, representing increase of 791% from 4,725 in the second quarter of 2024. Average MAT in the second quarter from GlocalMe same business was 42,271, representing an increase of 1.20.1% from 19,208 in the second quarter of 2024. Third average MAAT in the third quarter from Glucome live business was 2,633, representing an increase of 105.2% from 1,283 in the second quarter of 2024. Fourth average MAAT in the second quarter from GlocalMe mobile fixed broadband business was 576,198, representing a decrease of 4.4% from 602,000 2,909 in the second quarter of 2024. As of June 30, 2025, the company had 183 patents with 167 approved and 16 pending. Approved approved of SIM card was from 391 mobile operator globally as of today June 30, 2025. Total revenue for the second quarter 2025 was US$19.4 million, representing a decrease of 13.3% from US$22.4 million in the same period 2024. Revenue from service was $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 contributed 75.5% of the total revenue during the second quarter of 2025 compared to 63.4% in same period last year. Geographically speaking, during second quarter 2025, Japan contributed 33.6%, mainland China contributed 33.2%, both Americans 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 US$10.2 million in the second quarter 2025 compared to US$11 million in the same period as 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 US$10.1 billion or 51.9% of the total revenue in the second quarter of 2025 compares to US$8.7 million or 39.1% of total revenue in the same period in 2024. Net income in the second quarter of 2025 was US$0.7 million compared to US$2.2 million in the same period 2024. Adjusted EBITDA was US$1.4 million in second quarter T5 compared to US$3.3 million in the same period 2024. For the second quarter of 2025, we record operating cash outflow of US$0.9 million compared to an operating cash inflow of US$4.7 million in the same period of 2024. For the second quarter 2025, our capital expenditure was put compared to 1.6 million in the same period 2024. We maintained a solid balance sheet with cash and cash equivalent US$30.2 million as of June 30, 2025 compared to US$31.1 million as of March 31, 2025. With operators. Please open up for Q and A.

OPERATOR - (00:26:39)

Thank you. 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. At any time your question has been addressed and you would like to withdraw your question, please press Star then two at this time we will pause momentarily to assemble our roster. Question is from Theodore o', Neill, Lipfield Hills Research.

Theodore O'Neill - Equity Analyst - (00:27:19)

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.

Mr. Shi - (00:27:43)

I put some call ups first and then CEO has more comment on that in the second quarter. We as we just statements in this ER call some three new business. Three new business says GlocalMe, IoT business and SIM business and also live business. These three business has shown strong strong and rapid growth in terms average monthly active terminal. Even this as the figure tells us the IoT business the MATs increase nearly eight times a year over year basis. And the same mat's grows more than 100% compared with the same period last year. The life business in terms of MATs grows 105% year over year basis. Even the revenue generated from these three new business are small proportionately but the trend growth trend is massive. So we expect the new business IoT SIEM and live will scale our used basis to a multi millions basis so that give our futures a strong growth potential to 10 billion use business in the next couple years.

Jeff - (00:29:40)

Yeah, I'm Jeff some more comments about this because we put a lot of the resource and 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 now it goes 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 MIT side because you can see some for example like the major matter maybe every month can just active ones so mat 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 see the to make positive profit. So after three years investment that's the first and second from the SIM card. We already sold sim card for 300 pieces so we get the experience. We know how to play the game in this industry. So in some travel line for example like China travel to Hong Kong, try to Macau, try to Japan, we already go to the tier one sector. So in this sim car service in China so now we are more confident because we have new product for ecentrio this innovative super SIM car come up and we just launched end of June. So through the I think we do the promotion with Peng Zhong okay For the leaf advertisements. So it gets a very fast growth as well. So the finally so you can see our glucomate live product Currently the smaller revenue is we start to launch our glaucoma live product end of last year. So it's for cable. It's our unicorn is a fourth product and a long plug and in the second quarter end of second quarter we had new and the second generation of live product come out like Unicorn plus like this new Unicorn Pro. This new product come out is more stronger capability more high performance it will be win more market share. So more important I just emphasize here. Here is our platform product. I think it's our. We already finished many trials so and also we try to improve our improve our product better and better. We keep in our R and D and we just let our product to reach our requirement. So that's why we delay the launch of the commission launch. Our preview is we supposed to launch in the second quarter but now we postpone to the August as the middle of this August we will launch the global widely of our platform. I think currently the feedback and the trial is very positive and for our new version. So we believe this will lead fast growth and after our heavy investing in the branding and marketing so that's that I just give a brief about our three new product line growth. Although we have some impact from the tariff as I mentioned for micro for tariff impact for our traditional product I think we can see the fast growth scrolling product.

Theodore O'Neill - Equity Analyst - (00:34:11)

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?

Mr. Shi - (00:34:22)

Is it particular geographies? Yeah, as disco this on it for the second quarters our quarterly revenues is achieved below the guidance US$23 million. The main reason for this lowest revenues achievements because of the legacy mobile broadband business. The order from Japan was delayed was a couple million US dollars So this order will be placed in this quarter third quarter. This is a main reason for the second quarter revenues achieved below the guidance.

UNKNOWN - (00:35:27)

And.

Mr. Shi - (00:35:29)

The second micro reasons microeconomics and trade headwinds and that we our sales on the US market have not reached their expectations. And so the major geographical reasons is that Japan's markets delayed orders. The second is the trade headwinds. So that's a little bit impact our sales in US market. Thank you very much.

Vivian Zhang - Equity Analyst - (00:36:16)

Next question is from Vivian Zhang Diamond Equity Research. Hello, good morning and evening everyone. Thank you for taking my questions. So my question is regarding the company's upcoming products such as platform. Do you think these upcoming products will be affected by the industry headwinds and resulting in lower than expected sales?

Jeff - (00:36:47)

Because this new product I think is, I think it's a new concept, a new innovation in the industry. So from the. We already have hundreds of pieces already commercial trial. So all of the feedback is very positive. All of feedback is very positive. Also we improve, we adopt. There are some consumers opinion that this product better and more I think competitive in the industry. So because it's a new product, new concept, 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 obviously this product will be very successful. And that's why we are now heavy. We are very confident. We already have invested in our design and also we will more invest in the branding. So you can see the. From this month we start to launch product so in Hong Kong, US and with this big channel. And we have 10 countries in our plan, country by country we will with our local big channel partner, we start to launch this product. But we haven't placed a big forecast in our annual product as in revenue. Because I think. I believe this is from the concept to a bigger volume need two or three quarter. That's our current belief 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.

Vivian Zhang - Equity Analyst - (00:38:52)

Okay, I see. Thank you for answering my question. That's all my questions. Thank you. This concludes our Q and A session. I would like to turn the conference back to Mr. Gao for any closing remarks.

Daniel Gao - Operator - (00:39:12)

Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact Ucloudlink Group Investor Relations through the contact information provided on our website or speak to our investor relations firm, Christensen Adversary. We look forward to speaking to you. All again on our next quarterly call. Thank you.

OPERATOR - (00:39:41)

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