UCLOUDLINK(US:UCL)2024-08-14 10:16Executive Commentary and Strategic Highlights CEO highlights Q2 2024 revenues of $22.4 million, improved financial health, and strategic diversification into new 'GlocalMe Life' solutions and daily life applications - The company's 1.0 international data connectivity services business continues to grow, solidifying its market position, supported by the recovery in international travel and adoption of 5G solutions4 - Launched three new 'GlocalMe Life' solutions (KeyTracker, RoamPlug, UniCord) in May 2024, which are expected to become a promising new revenue stream4 - The company is strategically transitioning beyond the portable Wi-Fi market to scale its user base in daily life application scenarios, aiming to diversify revenue streams from data traffic to a mix including value-added services6 Second Quarter 2024 Financial & Operational Highlights Q2 2024 saw total revenues of $22.4 million (+1.7% YoY), a significant turnaround to $2.2 million net income, and continued ecosystem expansion Q2 2024 Key Financial Metrics (YoY) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | US$22.4 million | US$22.0 million | +1.7% | | Gross Profit | US$11.0 million | US$9.9 million | +11.4% | | Income/(Loss) from Operations | US$2.3 million | (US$0.9 million) | Turnaround to Profit | | Net Income/(Loss) | US$2.2 million | (US$0.9 million) | Turnaround to Profit | | Adjusted Net Income (Non-GAAP) | US$2.6 million | US$1.8 million | +44.4% | | Adjusted EBITDA (Non-GAAP) | US$3.3 million | US$2.1 million | +57.1% | Q2 2024 Key Operational Metrics (YoY) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Data Consumed | 42,133 TB | 45,682 TB | -7.8% | | Average Daily Active Terminals | 306,289 | 318,778 | -3.9% | - As of June 30, 2024, the company served 2,699 business partners in 61 countries and had a SIM card pool from 392 MNOs globally5 Detailed Financial Results (Q2 2024) Q2 2024 revenues increased 1.7% to $22.4 million, driven by service and product sales, with improved gross margin and a turnaround to $2.2 million net income Revenues Total revenues for Q2 2024 increased 1.7% to $22.4 million, driven by growth in international data connectivity and product sales, with shifts in geographic contribution Revenue Breakdown (US$ in millions) | Revenue Source | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $22.4 | $22.0 | +1.7% | | Revenues from services | $14.2 | $14.1 | +0.5% | | - International data connectivity | $9.4 | $9.0 | +4.4% | | - Local data connectivity | $1.8 | $2.2 | -18.2% | | - PaaS and SaaS services | $2.6 | $2.6 | +0.9% | | Revenues from sales of products | $8.2 | $7.9 | +3.9% | Geographic Revenue Distribution | Region | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Japan | 46.2% | 43.0% | | North America | 14.6% | 29.5% | | Mainland China | 23.5% | 11.6% | | Other | 15.7% | 15.9% | Cost of Revenues and Gross Profit Cost of revenues decreased 6.2% to $11.4 million, leading to an improved overall gross profit of $11.0 million and a gross margin of 49.2% Gross Profit and Margin Analysis (US$ in millions) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Overall Gross Profit | $11.0 | $9.9 | | Overall Gross Margin | 49.2% | 44.9% | | Gross Profit on Services | $8.5 | $8.2 | | Gross Margin on Services | 60.3% | 58.0% | | Gross Profit on Products | $2.5 | $1.7 | | Gross Margin on Products | 30.0% | 21.5% | - The decrease in cost of revenues was due to a decrease in both cost of services (-5.1%) and cost of products sold (-7.3%), driven by a higher proportion of high-margin international data services and a favorable product mix912 Operating Expenses and Profitability Total operating expenses remained stable at $9.1 million, leading to an operating income of $2.3 million and a net income of $2.2 million for Q2 2024 Operating Expenses Breakdown (US$ in millions) | Expense Category | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Research and development | $1.5 | $1.6 | -4.1% | | Sales and marketing | $4.3 | $3.5 | +22.1% | | General and administrative | $3.3 | $3.9 | -14.8% | | Total Operating Expenses | $9.1 | $9.0 | +1.1% | Profitability Metrics (US$ in millions) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Income/(Loss) from Operations | $2.3 | ($0.9) | | Net Income/(Loss) | $2.2 | ($0.9) | | Adjusted Net Income (Non-GAAP) | $2.6 | $1.8 | | Adjusted EBITDA (Non-GAAP) | $3.3 | $2.1 | Cash Flow and Financial Position Cash and cash equivalents increased to $26.8 million as of June 30, 2024, driven by a $4.7 million net operating cash inflow - Cash and cash equivalents increased to US$26.8 million as of June 30, 202421 - The increase in cash was mainly due to a net inflow of US$4.7 million from operations, partially offset by US$1.6 million in capital expenditures and US$0.8 million in bank borrowing repayments21 - Capital expenditures were US$1.6 million in Q2 2024, up from US$0.5 million in Q2 202322 Business Outlook UCLOUDLINK forecasts Q3 2024 total revenues between US$24.0 million and US$28.0 million, representing 0.4% to 17.2% year-over-year growth - The company expects Q3 2024 total revenues to be between US$24.0 million and US$28.0 million24 - This revenue guidance represents a projected year-over-year growth of 0.4% to 17.2%24 Financial Statements (Unaudited) Unaudited financial statements show total assets of $57.5 million, shareholders' equity of $19.6 million, and a Q2 2024 net income of $2.2 million Consolidated Balance Sheets As of June 30, 2024, total assets reached $57.5 million, with total liabilities decreasing and shareholders' equity growing to $19.6 million Key Balance Sheet Items (US$ in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | 26,831 | 23,371 | | Total Assets | 57,492 | 56,607 | | Total Liabilities | 37,860 | 40,554 | | Total Shareholders' Equity | 19,632 | 16,053 | Consolidated Statements of Comprehensive Income Q2 2024 saw a net income of $2.2 million on $22.4 million revenues, a significant improvement from a net loss in Q2 2023 Q2 Income Statement Summary (US$ in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenues | 22,355 | 21,977 | | Gross Profit | 10,994 | 9,865 | | (Loss)/Income from Operations | 2,252 | (937) | | Net (Loss)/Income | 2,239 | (917) | | Basic/Diluted EPS (ADS) | $0.06 | ($0.02) | Condensed Consolidated Statements of Cash Flows Net cash generated from operating activities was $4.7 million in Q2 2024, leading to a $2.3 million net increase in cash and cash equivalents Q2 Cash Flow Summary (US$ in thousands) | Cash Flow Activity | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net cash from operating activities | 4,718 | 3,411 | | Net cash used in investing activities | (1,599) | (375) | | Net cash used in financing activities | (805) | (339) | | Increase in cash | 2,314 | 2,697 | | Cash at end of period | 26,831 | 18,628 | Reconciliations of Non-GAAP and GAAP Results Reconciliations show Q2 2024 adjusted net income of $2.6 million and adjusted EBITDA of $3.3 million, reflecting non-GAAP adjustments Reconciliation to Adjusted Net Income (US$ in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net (loss)/income | 2,239 | (917) | | Add: share-based compensation | 340 | 1,601 | | Add: fair value loss in other investments | 97 | 1,215 | | Less: share of profit in equity method investment | (54) | (63) | | Adjusted net income | 2,622 | 1,836 | Reconciliation to Adjusted EBITDA (US$ in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net (loss)/income | 2,239 | (917) | | Add: Interest, Tax, D&A, etc. | 648 | 301 | | Adjusted EBITDA | 3,270 | 2,137 |