Good morning, and good evening, ladies and gentlemen. Thank you for standing by and welcome to you uCloudlink Group Inc. Second Quarter 2020 Earnings Conference Call. At this time, all participants will be in listen-only mode. After prepared remarks by the management team, there will be a question-and-answer session. Today's conference call is being recorded. I'd now like to turn the call over to your host today Mr. Bob Shen, Senior IR Manager of the Company. Please go ahead.

Thanks everyone for joining us on our second quarter 2020 earnings call today. Our earnings release is now available on our IR website at ir.ucloudlink.com as well as via newswire services. Here I give a brief introduction to our uCloudlink Inc. team. Zhiping Peng, is our Co-Founder and Chairman of the Board of Directors; Chaohui Chen, is our Co-Founder, Director and Chief Executive Officer; Zhigang Du, is our Director and Chief Operating Officer; Yimeng Shi, is our Chief Financial Officer; Zhu Tan, is our Chief Strategy Officer. Our CEO will begin with an introduction of our company overview and the business highlights. This will cover section one and section two of the earnings presentation posted on our IR website. And then our CFO, Yimeng Shi will discuss our financial results in section three. Before we proceed, please note that this call may contain forward looking statements made pursuant to the Safe Harbor provisions of the Private 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 expectations implied by these forward looking statements. All forward looking statements are expressly qualified in their entity by the cautionary statements, risk factors and the details of the Company's filing with the SEC. The Company does not assume any obligation to revise or update any forward looking statements as a result of new information, future events, changes in market conditions or otherwise except as required by law. Please also note that you uCloudlink's earnings press release and this conference call include discussions of an audited GAAP financial information as well as an audited and in depth financial measures. uCloudlink's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directory comparable GAAP measures. I will now turn the call over to our Co-Founder and CEO. Mr. Chaohui Chen. Please go ahead.

Thank you everyone. Let me now turn to Page 4 of the earnings presentation, which shows our vision and mission. We are the world's first leading mobile data traffic sharing marketplace with the one Cloud SIM technology, which enables consumers to enjoy mobile connections on any available network at anytime. We also enabled partners to be an over-the-top carrier worldwide to encourage roaming and the utilization problems, our innovative Cloud SIM technology that the technological foundation of our marketplace. We are the pioneer of introducing the sharing economic business model into telecommunication industry creating a marketplace for mobile data traffic, leveraging our innovative Cloud SIM technology and architecture. We have an innovative solution that is already deploying at scale, enabled the marketplace to be established with our mobile data bottleneck supply and enabled dynamic device data traffic navigation across multi-network connections. We redefined the mobile data connectivity experience allowing users to gain access to mobile data traffic allowance shared by network operators on our marketplace. So far we have everyday mobile data traffic allowance from 220 mobile network operator, we call, MNOs in 144 countries and regions in our Cloud SIM architecture. Page 5 is a high level view of the data marketplace that we envision and wish our technology enable. The left hand side of the slide shows the source of data from the market. With our Cloud SIM technology, we can simply buy SIM cards from carrier or their partners around the world; we call it firsthand mobile data. Our systems can also utilize the unused data from end user; we call it second hand mobile data. The right hand side of the slide shows the various users of data in the marketplace. This marketplace is valuable to both users and carriers, which enables an end user device…

Thank you, Mr. Chen. Hello everyone. Let's now turn to Page 15. The impact of the COVID-19 pandemic continued to rapidly evolve worldwide in the second quarter of 2020. Our total revenue decreased by 41.5% from $35.9 million in the three month ending June 30, 2019 to $21 million in the three months ended June 30, 2020. Revenues from service were $9.9 million representing a decrease of 53.5% from $21.3 million for the same period in 2019. The decrease was mainly attributable to the decrease of our 1.0 international data connectivity service revenue, which was impacted by prolonged international travel restrictions due to COVID-19. Service related revenues as a percentage total revenue also decreased to 47% during the second quarter of 2020. On the other hand, our 2.0 local data connectivity service was not impacted by COVID-19 and its revenue increased by approximately 14 times from $0.2 million in the second quarter of 2019 to $3.1 million in the second quarter of 2020, which partially offset the impact on our 1.0 international data connectivity service. So far, we have started our 2.0 local data connectivity service such as in China, Japan, with a faster growth rate in Japanese markets. And we will continue to expand to more countries and regions such as Asia, United States, Europe, et cetera, which have high growth potential. Revenue from PaaS and SaaS services were $0.5 million, representing a decrease of 72.2% from the $1.8 million in the period last year. This decrease was primarily due to international travel bans due to COVID-19, but our 2.0 local data connectivity service demand was strong and more effective. Revenues from sales of products were $11.1 million, decreasing of 24% from $14.6 million in the same period last year, which was primarily due to the decrease of our…

We will now begin the question-and-answer session. [Operator Instructions] And our question today comes from [indiscernible] with Jefferies. Please go ahead.

Hi. This is Alyssa [ph]. Thank you, management for your presentation. My question is regarding revenue mix -- geographic revenue mix. I think Mainland China's revenue mix has been dropping, and Japan and overseas has been increasing. So I was wondering what do you project for the trend line for future geographic revenue mix for China, will it continue to drop? And my second question is regarding U.S.-China relationship impacting our overseas business. So how do you assess this relationship impact to our business?

Yes, it's Yimeng Shi. Let me answer your questions. For geographic distribution in second quarter, the China Mainland contributed 8% of total revenues. And the Japan's market contributed 36% of total revenues. This typically is for the second quarter's performance. We believe the market in China Mainland is massive, and the percentage of revenue of Mainland China will be increased to some extent when the COVID-19 is recover and the international travel has been started. So thus, we believe the 8% is mainly cannibalization from China Mainland. We're not decreasing further to more extent and in futures. Yes, this typical 8% contribution from the second quarter, yes. For the U.S. and China relationship, so far we are very generative from our U.S. markets was growing in the second quarter. And we believe there is the demand from the U.S. market for either international travel and all for local mobile broadband service is growing and higher potentials in the futures.

Hi, this is Bob Shen. Let me add some points to your question. First, your question is regarding our percentage for diversified our business. I would say that it is good, it's good trend that we saw our business gradually increasing globally, which is in line with our expectations. Let me show you examples. Let's say, couple of years ago, for example in 2017, the revenue coming from Mainland China is over 60%. And for the Japanese market is only around 12%. Now, the situation gets changed. The Mainland China's revenue is 8% and the Japanese over China became the single largest market globally. I would say that this is in line with our business strategy, because we are -- first we are a global company and our business is internationally diversified which is good to our business. And secondly regarding the U.S. and China relation, although, we cannot forecast the U.S. and China relationship going forward in next couple of years. But internally, we -- first, as we mentioned, we are global company with our business very diversified internationally. So apart from U.S., we are also investing -- also expanded to Asia, Europe, et cetera to diversify our business. So, we hope that U.S. and China relationship gets better and gradually recover, but we also focus our business apart from U.S. So, as I mentioned, our business is globally diversified so that will be our business strategy and that will minimize the risk from U.S. section. So, I hope we answered your questions.

Yes, thank you very well. You answered it very well. If I may another question, can I have some maybe guidance on the gross margin for the next few quarters?

We will disclose that when we have the more clear explanations of the business in the coming quarters. And so far, we disclosed the top line guidance. And in the third quarter, the top line revenue guidance will be $21 million to $22 million.

Sorry, you mean the gross margin right, gross margin for the next several quarters?

Yes.

Okay. Yes I think right now our margin for second quarter 2020 gross margin is around 35%, but this is lower than actually -- because we are impacted by COVID-19, as our CFO just mentioned, we believe that the gross margin will continue to increase in the next couple of months because. First, we hope that our 1.0 international data connectivity service will recover. And secondly, I think our PaaS and SaaS section will recover well as, if the international travel ban on some or any good news from like vaccine of the COVID-19, if comes out. So, we expected and we believe that our gross margin and our service gross margin will continue to increase in the next couple of months.

[Operator instructions] And as there are no further questions, I'd like to turn the call back over to management for closing remarks. And I would like to turn the call back over to management for closing remarks.

Thank you, once again for joining us today. If you have further questions, please feel free to contact uCloudlink Investor Relations through the contact information provided on our website over the TPG investor relationship.

This concludes the earnings conference call. You may disconnect your lines this time. Thank you and have a good day.