UCLOUDLINK GROUP INC. Announces Unaudited Third Quarter

HONG KONG, Nov. 16, 2022 (GLOBE NEWSWIRE) — UCLOUDLINK GROUP INC. (“UCLOUDLINK” or the “Company”) (NASDAQ: UCL), the world’s first and main cell information site visitors sharing market, at the moment introduced its unaudited monetary outcomes for the three months ended September 30, 2022.

Third Quarter 2022 Financial Highlights

• Total revenues had been US$18.2 million, representing a lower of 5.7% from US$19.3 million within the third quarter of 2021.
• Gross revenue was US$8.7 million, representing a rise of 59.0% from US$5.5 million within the third quarter of 2021.
• Loss from operations was US$4.8 million, in comparison with a loss from operations of US$7.0 million within the third quarter of 2021.
• Net loss was US$4.6 million, in comparison with a internet lack of US$7.0 million within the third quarter of 2021.
• Adjusted internet revenue (non-GAAP) was US$0.6 million, in comparison with an adjusted internet lack of US$6.0 million within the third quarter of 2021.
• Adjusted EBITDA (non-GAAP) was US$0.9 million, in comparison with detrimental US$5.4 million within the third quarter of 2021.

Third Quarter 2022 Operational Highlights

• Total information consumed within the third quarter by way of the Company’s platform was 46,234 terabytes (4,886 terabytes procured by the Company and 41,348 terabytes procured by our business companions), representing a rise of 6.6% from 43,369 terabytes within the third quarter of 2021.
• Average every day energetic terminals within the third quarter had been 297,501 (1,522 owned by the Company and 295,979 owned by its business companions), representing a rise of 16.2% from 256,124 within the third quarter of 2021. 65.0% of every day energetic terminals was from uCloudlink 2.0 native information connectivity providers and 35.0% of every day energetic terminals was from uCloudlink 1.0 worldwide information connectivity providers through the third quarter of 2022. Average every day information utilization per terminal was 1.71 GB in September 2022.
• As of September 30, 2022, the Company had served 2,306 business companions in 58 nations and areas. The Company had 177 patents with 125 accredited and 52 pending approval, whereas the pool of SIM playing cards was from 330 MNOs globally as of September 30, 2022.

Executive Commentary

“Despite continued global economic volatility during the third quarter of 2022, we were pleased to achieve positive operating cash flow for the second consecutive quarter. Due to our increasing confidence in our improved financial position, we announced in October the early redemption of the convertible debentures. We realized revenues of US$18.2 million for the third quarter of 2022, and achieved a positive adjusted net income (non-GAAP) for the first time since the global outbreak of the COVID-19 pandemic in the second quarter of 2020. We expect revenues to increase and operating cash flow to improve as we head into the fourth quarter of 2022 and next year. We observed a substantial year-over-year increase in the revenues from international data connectivity services for the second consecutive quarter, reflecting increased international travel in recent quarters. We expect our international data connectivity services business to continue to be the key driver of our revenue growth going forward, leading to improved bottom-line results for UCLOUDLINK. During the third quarter, we continued to invest in upgrading our existing 5G and IoT solutions and products to ensure that our offerings not only elevate user experience but also enhance the readiness of large-scale commercial application. We are committed to providing our customers and partners with ‘better-connecting’ solutions and services, which we believe is the foundation of our business growth,” stated Chaohui Chen, Director and Chief Executive Officer of UCLOUDLINK.

Yimeng Shi, Chief Financial Officer of UCLOUDLINK, said, “We reported a significant improvement in gross margin, which was 47.7% in the third quarter of 2022, compared to 28.3% in the same period of 2021. Our efforts to increase operating efficiencies have also resulted in a 21-percentage-point decrease in operating expenses (excluding share-based compensation expenses) as a percentage of total revenues compared to the same period in last year, enabling us to achieve positive adjusted EBITDA (non-GAAP). We believe we are on track to execute our growth strategy for the remainder of 2022 and beyond.”

Third Quarter 2022 Financial Results

Revenues

Total Revenues had been US$18.2 million, representing a lower of 5.7% from US$19.3 million in the identical interval of 2021.

• Revenues from providers had been US$12.6 million, representing a rise of 20.5% from US$10.5 million in the identical interval of 2021. This improve was primarily attributable to the rise in revenues from worldwide and native information connectivity providers.
  • Revenues from information connectivity providers had been US$10.1 million, representing a rise of 31.8% from US$7.6 million in the identical interval of 2021. This improve was primarily attributable to a rise in revenues from worldwide information connectivity providers to US$8.0 million within the third quarter of 2022 from US$6.1 million in the identical interval of 2021, and a rise in revenues from native information connectivity providers to US$2.1 million within the third quarter of 2022 from US$1.5 million in the identical interval of 2021. This improve in revenues from information connectivity providers was primarily attributable to the gradual restoration of worldwide journey and the continual improvement of the native information connectivity providers.
  • Revenues from PaaS and SaaS providers had been US$2.4 million, representing a lower of 10.3% from US$2.7 million in the identical interval of 2021, primarily because of the unfavorable overseas foreign money influence.
• Revenues from gross sales of merchandise had been US$5.6 million, representing a lower of 36.7% from US$8.8 million in the identical interval of 2021, primarily because of the lower in gross sales of sure terminals and information associated merchandise.
• Geographic Distribution 
  During the third quarter of 2022, Japan contributed 35.1%, Mainland China contributed 2.4%, and different nations and areas contributed the remaining 62.5% of the full revenues, in comparison with 46.6%, 3.7% and 49.7%, respectively, in the identical interval of 2021. The improve in proportion of revenues from different nations and areas was primarily attributable to the income progress in North America.

Cost of Revenues

Cost of revenues was US$9.5 million, representing a lower of 31.2% from US$13.8 million in the identical interval of 2021. This lower was primarily attributable to decrease prices related to the lower in gross sales of merchandise.

• Cost of providers was US$5.3 million, representing a lower of 10.2% from US$5.9 million in the identical interval of 2021.
• Cost of merchandise bought was US$4.2 million, representing a lower of 46.9% from US$7.9 million in the identical interval of 2021.

Gross Profit

Overall gross revenue was US$8.7 million, in comparison with US$5.5 million in the identical interval of 2021. Overall gross margin was 47.7% within the third quarter of 2022, in comparison with 28.3% in the identical interval of 2021.

Our gross revenue on providers was US$7.3 million, in comparison with US$4.6 million in the identical interval of 2021. Our gross margin on providers was 57.9% within the third quarter of 2022, in comparison with 43.5% in the identical interval of 2021.

Our gross revenue on gross sales of merchandise was US$1.4 million, in comparison with US$0.9 million in the identical interval of 2021. Our gross margin on gross sales of merchandise was 24.7% within the third quarter of 2022, in comparison with 10.2% in the identical interval of 2021.

Operating Expenses

Total working bills had been US$7.9 million, in comparison with US$12.7 million in the identical interval of 2021.

• Research and improvement bills had been US$1.5 million, representing a lower of 57.8% from US$3.5 million in the identical interval of 2021. This lower was primarily as a result of a lower of US$1.6 million in employees prices associated to value management measures, and a lower of US$0.2 million in skilled service charges.
• Sales and advertising bills had been US$2.1 million, representing a lower of 30.7% from US$3.1 million in the identical interval of 2021. This lower was primarily as a result of a lower of US$1.1 million in employees prices associated to value management measures, and a lower of US$0.2 million in promotional charges, partially offset by a rise of US$0.4 million in share-based compensation bills.
• General and administrative bills had been US$4.3 million, representing a lower of 29.1% from US$6.1 million in the identical interval of 2021. This lower was primarily as a result of a lower of US$1.1 million in employees prices associated to value management measures, a lower of US$0.7 million in skilled service charges, and a lower of US$0.7 million in share-based compensation bills, partially offset by a rise of US$1.2 million in dangerous debt provision.

Loss from Operations

Loss from operations was US$4.8 million, in comparison with a loss from operations of US$7.0 million in the identical interval of 2021.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA (Non-GAAP), which excludes the influence of share-based compensation, truthful worth achieve/loss in different investments, share of revenue/loss in fairness technique funding, internet of tax, curiosity expense, revenue tax credit score/bills and depreciation and amortization, was US$0.9 million, in comparison with detrimental US$5.4 million in the identical interval of 2021.

Net Interest Expenses

Net curiosity bills had been US$0.02 million, in comparison with internet curiosity bills of US$0.05 million in the identical interval of 2021.

Net Loss

Net loss was US$4.6 million, in comparison with a internet lack of US$7.0 million in the identical interval of 2021.

Adjusted Net Income (Non-GAAP)

Adjusted internet revenue, which excludes the influence of share-based compensation, truthful worth achieve/loss in different investments and share of revenue/loss in fairness technique funding, internet of tax, was US$0.6 million, in comparison with an adjusted internet loss US$6.0 million in the identical interval of 2021.

Basic and Diluted Loss per ADS

Basic and diluted loss per ADS attributable to strange shareholders had been US$0.15 within the third quarter of 2022, in comparison with fundamental and diluted loss per ADS of US$0.25 in the identical interval of 2021.

Cash and Cash Equivalents and Short-Term Deposits

As of September 30, 2022, the Company had money and money equivalents and short-term deposits of US$12.5 million, in comparison with US$12.2 million as of June 30, 2022. This improve was primarily attributable to the online influx of US$1.2 million from operations and internet proceeds of US$2.1 million from financial institution borrowings, partially offset by a reimbursement of US$2.5 million for financial institution borrowings.

Capital Expenditures (“CAPEX”)

CAPEX was US$0.1 million in comparison with US$0.3 million in the identical interval of 2021.

Business Outlook

For the fourth quarter of 2022, UCLOUDLINK expects whole revenues to be between US$19.0 million and US$22.0 million, representing a rise of 8.0% to 25.0% in comparison with the identical interval of 2021.

The above outlook is predicated on present market situations and displays the Company’s preliminary estimates of market and working situations and buyer demand. The world outbreak of COVID-19, which has had a extreme and detrimental influence on the worldwide economy because the first quarter of 2020, continues to current varied world dangers, the total influence of that are nonetheless evolving. We will fastidiously monitor COVID-19 associated elements reminiscent of vaccine rollouts, the influence of which is tough to investigate and predict, and topic to alter.

Recent Development

Referring to our press launch dated October 28, 2022, the Company has carried out a privately negotiated transaction with the holder of its current convertible debenture issued on January 6, 2022 (the “Convertible Debentures”) to redeem US$1,000,000 principal quantity of the Convertible Debentures for an combination redemption quantity of US$1,053,384, together with accrued and unpaid curiosity. The holder of the Convertible Debentures has, now and again, transformed all the remaining quantity of the Convertible Debentures since July 2022. Following the redemption, the Company has nil excellent quantity of the Convertible Debentures. The Company at the moment has 244,686,120 Class A strange shares and 122,072,980 Class B strange shares excellent.

Non-GAAP Financial Measures

To complement the monetary measures ready in accordance with typically accepted accounting ideas within the United States, or GAAP, this press launch presents, adjusted internet revenue/(loss) and adjusted EBITDA, as supplemental measures to overview and assess the Company’s working efficiency. The presentation of those non-GAAP monetary measures will not be meant to be thought of in isolation or as an alternative choice to the monetary data ready and offered in accordance with U.S. GAAP. Adjusted internet revenue/(loss) is outlined as internet loss excluding share-based compensation, truthful worth achieve/loss in different investments and share of revenue/loss in fairness technique funding, internet of tax. Adjusted EBITDA is outlined as internet loss excluding share-based compensation, truthful worth achieve/loss in different investments, share of revenue/loss in fairness technique funding, internet of tax, curiosity expense, revenue tax credit score/bills and depreciation and amortization.

The Company believes that adjusted internet revenue/(loss) and adjusted EBITDA assist determine underlying developments in its business that would in any other case be distorted by the impact of sure bills which can be included in loss from operations and internet loss. The Company believes that adjusted internet revenue/(loss) and adjusted EBITDA present helpful details about its working outcomes, improve the general understanding of its previous efficiency and future prospects and permit for higher visibility with respect to key metrics utilized by its administration in its monetary and operational decision-making.

The non-GAAP monetary measures should not outlined beneath U.S. GAAP and should not offered in accordance with U.S. GAAP. The non-GAAP monetary measures have limitations as analytical instruments. One of the important thing limitations of utilizing adjusted internet revenue/(loss) and adjusted EBITDA is that they don’t mirror all objects of revenue and expense that have an effect on the Company’s operations. Share-based compensation, truthful worth achieve/loss in different investments and share of revenue/loss in fairness technique funding, internet of tax, have been and will proceed to be incurred within the Company’s business and isn’t mirrored within the presentation of adjusted internet revenue/(loss). Further, the non-GAAP monetary measures might differ from the non-GAAP data utilized by different corporations, together with peer corporations, and subsequently their comparability could also be restricted.

The Company compensate for these limitations by reconciling the non-GAAP monetary measure to the closest U.S. GAAP efficiency measure, all of which needs to be thought of when evaluating its efficiency. The Company encourages traders and others to overview its monetary data in its entirety and never depend on a single monetary measure.

Reconciliation of every of those non-GAAP monetary measures to essentially the most immediately comparable GAAP monetary measure is ready forth on the finish of this launch.

Conference Call

UCLOUDLINK will maintain a convention name at 8:30 a.m. Eastern Time on Wednesday, November 16, 2022 (9:30 p.m. Beijing Time on the identical day) to debate monetary outcomes and reply questions from traders and analysts. Listeners might entry the decision by dialing:

Participants ought to dial in at the least 10 minutes earlier than the scheduled begin time and ask to be related to the decision for “UCLOUDLINK GROUP INC.”

Additionally, a dwell and archived webcast of the convention name will probably be obtainable at https://ir.ucloudlink.com.

A phone replay will probably be obtainable one hours after the tip of the convention till November 23, 2022 by dialing:

About UCLOUDLINK GROUP INC.

UCLOUDLINK is the world’s first and main cell information site visitors sharing market, pioneering the sharing economy business mannequin for the telecommunications trade. The Company’s services and products ship distinctive worth propositions to cell information customers, handset and smart-hardware corporations, cell digital community operators (MVNOs) and cell community operators (MNOs). Leveraging its modern cloud SIM know-how and structure, the Company has redefined the cell information connectivity expertise by permitting customers to realize entry to cell information site visitors allowance shared by community operators on its market, whereas offering dependable connectivity, excessive speeds and aggressive pricing.

Safe Harbor Statement

This announcement accommodates forward-looking statements. These statements are made beneath the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements may be recognized by terminology reminiscent of “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and related statements. Among different issues, the monetary steerage and quotations from administration on this announcement, in addition to UCLOUDLINK’s strategic and operational plans, comprise forward-looking statements. UCLOUDLINK may make written or oral forward-looking statements in its periodic stories to the U.S. Securities and Exchange Commission, in its annual report back to shareholders, in press releases and different written supplies and in oral statements made by its officers, administrators or staff to 3rd events. Statements that aren’t historic details, together with however not restricted to statements about UCLOUDLINK’s beliefs and expectations, are forward-looking statements. Forward wanting statements contain inherent dangers and uncertainties. Various elements might trigger precise outcomes to vary materially from these contained in any forward-looking assertion, together with however not restricted to the next: UCLOUDLINK’s methods; UCLOUDLINK’s future business improvement, monetary situation and outcomes of operations; UCLOUDLINK’s means to extend its person base and utilization of its cell information connectivity providers, and enhance operational effectivity; competitors within the world cell information connectivity service trade; modifications in UCLOUDLINK’s revenues, prices or expenditures; governmental insurance policies and laws regarding the worldwide cell information connectivity service trade, normal financial and business situations globally and in China; the influence of the COVID-19 pandemic to UCLOUDLINK’s business operations and the economy in China and elsewhere typically; and assumptions underlying or associated to any of the foregoing. Further data concerning these and different dangers is included within the Company’s filings with the Securities and Exchange Commission. All data supplied on this press launch and within the attachments is as of the date of the press launch, and UCLOUDLINK undertakes no responsibility to replace such data, besides as required beneath relevant legislation.

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