uCloudlink Group Inc. (UCL) Q4 2025 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the uCloudlink Group, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Shichao Gao, company IR. Please go ahead.

Okay. Hello, everyone, and thank you for joining us on uCloudlink's Fourth Quarter and Full Year 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. Zhiping Peng, Co-Founder and Chairman of the Board of Directors; Mr. Chaohui Chen, Co-Founder, Director and Chief Executive Officer; and Mr. Yimeng Shi, 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 your questions in the Q&A session that follows. 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 company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations projected or implied by these forward-looking statements. All forward-looking statements are expressly qualified in their entirety by the cautionary statements, risk factors and details of the company's filings 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 uCloudlink's earnings press release and this conference call include discussions of unaudited GAAP financial information and unaudited non-GAAP financial measures. uCloudlink's press release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures. I will now turn the call over to Mr. Chen. Please go ahead.

Thank you, Daniel, and good morning or evening, everyone. Despite significant macroeconomic headwinds through year 2025, including tariff, we remained steadfast in strategically investing across our 3 new business lines. Against this challenging backdrop, we maintained our financial health and delivered stable performance. Net income for the year increased 38.2% year-over-year to USD 6.3 million, with net cash inflow from operations reaching USD 3.2 million. Total revenues from Mainland China surged 16.5% from last year, underscoring how our uCloudlink 1.0 international data connectivity solutions are accelerating broader consumer adoption and further solidifying our leadership in the global roaming market. This robust performance demonstrates the resilience of our core strategy and strategic impact of the investments we made in our 3 new growth engines. These new product launches have diversified our business and allowed us to successfully navigate a persistently challenging macroeconomic and trade environment. Through strict operational discipline and focus, we have laid a solid foundation to build upon and accelerate growth in year 2026. Moreover, our smart hardware and data are emerging as a key gateway to AI and big data connectivity, while our heavy investment in Pet AI, analyzing pet language, health, behavior and scent data, continues to strengthen our industry leadership. We remain highly focused on overcoming the world's 3 fundamental digital divides through transformative connectivity solutions. We continue to dismantle the global connectivity divide by breaking down international roaming barriers to ensure our users maintain seamless network access anywhere in the world. At the same time, we are tackling the single-multinetwork divide through our proprietary CloudSIM and HyperConn technologies, which are setting industry standards for intelligent multinetwork connectivity and reliability. Lastly and most innovatively, we are bridging the emotional digital divide with our AI-powered pet ecosystem, creating entirely new and meaningful connections between humans and their pets. I will now review the highlights for each of our key business lines. I will start with our GlocalMe Life business which continues to generate solid growth momentum. Average daily active terminals during the fourth quarter surged 897.9% year-over-year while average daily active users, which excludes PetPhone, increased 409.1% year-over-year. Within our broader GlocalMe Life portfolio, our industry-first UniCord Plus and UniCord Pro series remain highly competitive and continue to differentiate themselves with their seamless connectivity across multiple networks, 6-Tech global positioning and fast-charging capabilities. This is further strengthening our competitive edge in the travel, automotive and secure networking markets. At the same time, PetPhone orders continue to scale and accelerate since its initial launch last quarter, reflecting strong market traction across the board. We kicked off 2026 with a powerful showcase of our latest innovations at CES in Las Vegas and MWC in Barcelona. As a highlight, we outlined our vision to eliminate the Pet People Divide through the PetPogo ecosystem and the introduction of the all-new PetCam that complements the PetPhone. This revolutionary AI-powered ecosystem will transform how we connect with and care for our pets and transcends basic pet tracking functions by establishing a comprehensive Safety-Wellness-Emotion Connection loop that enables owners to see, hear and interact with their pets in real time from anywhere in the world. The market response has been exceptional, generating significant global attention and validating our product road map. Purchase orders are growing alongside strong consumer feedback, laying solid foundation for us to drive scaled commercialization in year 2026. Also making its debut at CES was the MeowGo G50 Max, an AI-powered connectivity hub with Sky-to-Ground 5G/satellite and Wi-Fi integration that creates mobile Wi-Fi hotspots anywhere. This solution provides a critical safety net with 2-way messaging and emergency SOS via satellite networks, ensuring connectivity even when terrestrial networks are beyond reach. Powered by our patented AI-powered HyperConn technology, it can intelligently switch between terrestrial 5G networks and Wi-Fi networks to deliver a frictionless One Device, One Account roaming experience. At its core, it creates a reliable mobile Wi-Fi hotspot, ensuring unmatched coverage and a truly seamless connection. Moving on to our GlocalMe IoT business. We maintained a robust growth trajectory with user adoption and revenue contribution increasing strongly on a year-over-year basis during the quarter. In the fourth quarter, average daily active terminals recorded a year-over-year increase of 434.8%, highlighting the strategic positioning and traction we are getting in high-growth sectors, such as in-car infotainment and security cameras. Having established a strong initial presence in these key sectors, we plan to scale these solutions into additional industrial verticals in the future to drive further expansion of our ecosystem. Turning to our GlocalMe SIM business line. Our eSIM TRIO solution continues to gain strong traction following its pilot program last quarter, with cumulative SIM card sales now surpassing several hundred thousand units as growth momentum accelerates. This is creating strong growth momentum, with average daily active terminals increasing 180.8% year-over-year during the quarter, validating both our carrier partnership model and its market positioning as a permanent secondary SIM card for users. More importantly, our carrier co-issuance program has begun pilot deployment and is expanding fast, providing a highly effective, low CapEx solution for operators that enhances their global roaming capabilities. This First SIM model is gaining strong traction and is welcomed by both operators and users, confirming robust product market fit. Looking ahead, 2026 will be a pivotal year of execution and transformation for us. We closed 2025 with a streamlined organizational structure, having integrated our branding, online and offline sales and e-commerce teams to better align with our evolving strategy. Building on this foundation, we kicked off the new year by onboarding highly experienced leaders with deep to customer expertise to strengthen our capabilities for next phase of growth. At the same time, we are actively forging partnerships with world-renowned universities and leading global technology companies, integrating resources and laying a solid foundation for long-term success. The strong market feedback from CES 2026, combined with accelerating sales of new solutions, provides us with multiple powerful growth engines. We are confident in our ability to scale our user base globally, further diversify our revenue streams and bridge critical digital divides, from cross-border connectivity to emotional distance between people and their pets. With that disciplined optimism in mind, we are confident that we have the right strategy in place to drive sustainable growth going forward. For the first quarter of year 2026, we expect total revenues to be between USD 16 million to USD 17 million, representing a decrease of 9.1% to 14.4% compared to the same period of year 2025. For year 2026, we expect total revenues to be between USD 85 million and USD 100 million, representing an increase of 4.4% to 22.9% from year 2025. I will now turn the call over to Mr. Shi.

Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the fourth quarter and full year 2025. Average daily active terminals, DAT, and average monthly active terminal, MAT, are important operating metrics for us, as they measure customer usage trends over the period and are reflective of our business performance. In the fourth quarter of 2025, average DAT was 328,847, of which 15,636 owned by the company and 313,211 not owned by the company, representing an increase of 6.6% from the fourth quarter of 2024. During the quarter, 57.1% of DAT were from uCloudlink 1.0 international data connectivity services and 42.9% were from uCloudlink 2.0 local data connectivity services. In December 2025, the average daily data usage per terminal was 1.59 gigabytes. Average MATs in the fourth quarter were 704,393, representing an increase of 11.1% from 634,245 in the fourth quarter of 2024. Growth was driven by strong momentum across our 3 new growth engines with average MATs for GlocalMe IoT, GlocalMe SIM and GlocalMe Life increasing 127.5%, 153.8% and 616.9%, respectively, from the same period last year. Average MATs from GlocalMe MeowGo business, which we previously referred to as GlocalMe mobile/fixed broadband business, decreased slightly by 0.5% year-over-year, reflecting a relatively stable user base in this segment. Average daily active users, DAU, and monthly active users, MAU, represent the average number of unique users engaging with our GlocalMe services on a daily and monthly basis, respectively. Both metrics showed strong growth momentum in the fourth quarter. Average DAU in the fourth quarter were 353,278, representing an increase of 10.4% from 320,037 in the fourth quarter of 2024. GlocalMe IoT, GlocalMe SIM and GlocalMe Life, all delivered significant gains, with average DAUs up 558.7%, 349.8% and 409.1%, respectively, from the same period last year. Average DAUs from GlocalMe MeowGo business declined slightly by 4% year-over-year. Average MAUs were 738,777, representing a 9.2% increase from 676,610 in the fourth quarter of 2024. Average MAUs from GlocalMe IoT, GlocalMe SIM, GlocalMe Life business lines saw increases of 66%, 153.3% and 460.2%, respectively, from the same period last year. Average MAUs from GlocalMe MeowGo business decreased slightly by 2.2% year-over-year. As PetPhone is a newly launched business, we are beginning to see early user adoption during the quarter. In the fourth quarter, average DAT and MAT for PetPhone reached 257 and 571, respectively, while average DAU and MAU were 745 and 977, reflecting the initial traction of this new offering. As of December 31, 2025, the company had 206 patents, with 181 approved and 25 pending approval, and a pool of SIM cards from 398 MNOs globally. Total revenues for the fourth quarter 2025 were USD 22.1 million, representing a decrease of 14.6% from USD 26 million in the same period of 2024. Revenues from services were USD 15.2 million, representing a 1.1% increase from USD 15 million in the same period 2025 (sic) [ 2024 ]. Revenue from services contributed 68.5% of total revenues during the fourth quarter of 2025, compared to 57.8% in the same period last year. Geographically speaking, during the fourth quarter of 2025, Japan contributed 43.6%, Mainland China contributed 26.8%, North America contributed 11.2% and other countries and regions contributed the remaining 18.4% compared to 53.6%, 20%, 12.1% and 14.3%, respectively, in the same period of 2024. Our gross profit was USD 11.4 million in the fourth quarter of 2025, compared to USD 11.2 million in the same period of 2024. Overall gross margin in the fourth quarter of 2025 increased to 51.6% from 43% in the same period of 2025 (sic) [ 2024 ]. The gross margin on services was 61.7% in the fourth quarter of 2025, compared to 58.6% in the same quarter (sic) [ period ] of 2024. Excluding share-based compensation, total operating expenses were USD 9.4 million, compared with USD 13.9 million in the fourth quarter of 2024. Net loss in the fourth quarter of 2025 was USD 3.1 million, compared with a net loss of USD 1.5 million in the same period of 2024. Adjusted EBITDA was positive USD 3.1 million in the fourth quarter of 2025, compared with negative USD 2.3 million in the same period of 2025 (sic) [ 2024 ]. For the fourth quarter of 2025, we recorded operating cash inflow of USD 4.7 million, compared to USD 0.5 million in the same period of 2024. For the fourth quarter of 2025, our capital expenditures were USD 20,000 compared to USD 0.6 million in the same period of 2024. Moving on to 2025 full year financial results. Average DATs and MATs showed similar patterns to those observed in the fourth quarter. For the full year, average DATs were 322,169, of which 18,449 owned by the company and 303,720 owned by our business partners, representing an increase of 1.7% from 316,688 in 2024. In 2025, 56.3% of DATs were from uCloudlink 1.0 international data connectivity services and 43.7% of DATs were from uCloudlink 2.0 local data connectivity services. Average MATs in 2025 were 681,672, representing an increase of 8% from 631,137 in 2024. Growth was primarily driven by our 3 new growth engines, with average MATs for GlocalMe IoT, GlocalMe SIM, GlocalMe Life increasing 360.7%, 190.8% and 356.0% year-over-year, respectively. Average DAU in 2025 were 340,036, representing an increase of 4.2% from 326,412 in 2024. This growth was supported by strong expansion in GlocalMe IoT, GlocalMe SIM and GlocalMe Life, where average DAUs increased 737.3%, 321.5% and 349.1% year-over-year, respectively. Average MAU in 2025 were 723,706, representing an increase of 8.9% from 664,815 in 2024. Average MAUs from GlocalMe IoT, GlocalMe SIM and GlocalMe Life increasing 251.2%, 167.5% and 413% year-over-year, respectively. Total revenues for 2025 reached USD 81.4 million, compared with USD 91.6 million in 2024. Revenue from services was USD 61.0 million in 2025, representing a 1.8% year-over-year increase from USD 60 million in 2024. Revenues from data connectivity services were USD 47.8 million, a slight increase from USD 47.6 million in 2024. Within this segment, international data connectivity services remained the largest contributor, rising from USD 39.5 million in 2024 to USD 41.1 million in 2025, representing a 4% year-over-year increase. Overall gross margin was 52.4% in 2025, an increase when compared with 48.4% in 2024. Gross margin for services was 58% in 2025, compared with 60.8% in 2024. For the full year 2025, excluding share-based compensation, total operating expenses were USD 40.4 million compared to USD 40.8 million in 2024. Net income was USD 6.3 million in 2025, compared with USD 4.6 million in 2024, representing a 38.2% increase from 2024. Adjusted EBITDA was USD 7.2 million in 2025, compared to USD 7.1 million in 2024. For the full year, our capital expenditures were USD 1.0 million, compared to USD 4 million in 2024. We generated positive operating cash inflow of USD 3.2 million, compared to USD 9.2 million in 2024. Turning to balance sheet items. Our cash and cash equivalents increased to USD 32.8 million as of December 31, 2025, compared to USD 28.5 million as of September 30, 2025. We remain focused on strengthening our financial position and believe we are well positioned to drive continued growth in our business. With that, operator, let's open it up for Q&A.

[Operator Instructions] Your first question today comes from Theodore O'Neill from Litchfield Hills Research.

Looking at your guidance for 2026 implies a fairly strong second half of the year, and I was wondering if you could talk about that growth in terms of what product lines or geographic areas you expect to see -- participate the most in that growth.

Thanks, Neil. Yes, the outlook for the year 2026, we expect a growth, a robust growth trend for our overall business. The main growth driver, as we disclosed in the year 2025, the 3 new business lines are main growth driver, which are GlocalMe IoT, GlocalMe SIM and GlocalMe Life as well as a new business line PetPhone separated from GlocalMe Life business line. This year is a separate business line for PetPhone business. So all those 4, now is the 4 business lines will drive our main business growth in terms of revenue. Our legacy business, Wi-Fi, mobile broadband Wi-Fi, has kept stable business, which will contribute solid cash flow to support our investments on our 4 new business. So as we disclose last year in the year 2025, we invested massively on 4 new business lines. All these investments came from the cash inflow generated from our legacy business, mobile broadband business. So last year, in the year 2025, the operational metrics has told us the growth driver will come into revenue for the year 2026. As we disclosed, the DAU, MAU metrics for these 3 new business, IoT, SIM and Life, the growth massively a couple times more than the previous year 2024. So this will carry on as a driver for our growth in year 2026.

And could you give us some more information about GlocalMe IoT? Are there particular industries that -- where you see growth for the IoT part of the business? Or is it very broad-based?

Our IoT business because we not just invest last year, we almost -- invested nearly 10 years. But from last year, we finished our IoT product embed into the industry IoT leaders. We finished all the trial. That's why we can see a larger increase because they already embed our IoT cloud SIM card solution into their, like a camera, like a car infotainment. These -- even the battery monitoring because you know all the Chinese manufacturers and these smart devices more and more go to the outside China -- go to the worldwide. So we just enable them to cross the network in each country easily. So this helps us gain a volume customer increase. All these our partners, so give us the forecast this year, their IoT products like security camera, like CarPlay, like the power monitoring and battery monitor, et cetera, and they will have a large volume deployed with our solution. Before that, we just finished the test before last year. But from the second half of last year, we see more and more these industry players embed our solution because our solution is much better than [ what's currently practiced ] inside. So that's why we get -- we have more confidence in the next couple of years we can get millions of connections and revenues from these partners.

[Operator Instructions] Your next question comes from Vivian Zhang from Diamond Equity Research.

This is Vivian Zhang with Diamond Equity Research. Congratulations on the results achieved. I got several questions. Firstly, can you provide more details about the recently introduced PetPogo ecosystem and the PetCam? And how do you expect them to drive the growth of sales and profit margins?

Okay. Last quarter, so year 2025, the fourth quarter, we are -- in the last October, we newly launched our PetPhone product in Asia area, then to U.S. area. I think that we already start up, I think, the solution and the PetPhone solution, bridging the digital gap between the people and the pets. And also, we get a very popular during the CES exhibition and also MWC in Barcelona. So like CBS, like Reuters and even China's Xinhua, they all gave a very focused report about our new product. And also last CES, we also launched a new PetCam and also the pet camera suite, I think, integrate the PetPhone and the PetCam. So now we can provide not only just the voice connection with the people and the pet, but also, we can provide the camera, I think the video connection with the pet. That means we can provide the connection through the pet, the pet view, we call it a [ pet TV ]. Also, we can use this pet camera as a CCTV to monitor, to understand the pet, the mood, the behavior and their security, et cetera. So that's why we are not only just start on the voice for PetPhone, but we have more device and more function coming, like PetCam. This is PetCam can, I think, can do the live broadcast, live video. Also can be as a CCTV. So it's very useful to improve the safety and the communication effect with the pet. And also, we -- our PetPogo, this is hardware, it's pet camera and the PetPhone. Our ecosystem, our app, we call the pet and digital world is our PetPogo. So in the international version, we call the PetPogo, for Chinese version, we call it PetWoof. It's separated because of data security arrangement. So I think for this PetPogo, we can provide, we can solve it. I think first is the communication between the pet and the people. We can provide the AI translation for the AI translation for the multi languages. That's the first part. And the second, we can solve it end-to-end for pet safety, including the tracking and the training. Also, we can provide health care for the pet. It's end-to-end. So we can see that once the PetPogo launch end of [ next ] month, we can see the PetPhone significantly apply different with the current tracker and the current pet training device. We -- the PetPhone, finally, we understand it can solve 3 major anxieties. First is about communication. The second is about safety. And the third is about health. So if compare the last single-function device, PetPhone and PetPogo can provide more effective, pinpoint anxiety solutions. So PetPogo, I think we mentioned PetPogo will include not only just PetPhone, but PetPhone we believe it will be like an iPhone with app inside first. And the second, PetPogo with community and with more functional and even AI agent inside, so like a translation, like a video camera, healthy AI, et cetera, all put into here. And also, we have a community with all the people and the pet they live together and they sleep together and they talk together. So that's like a pet world, like a WeChat that we call the pet WeChat and the pet TikTok. So we are integrating more and more functions in the PetPogo. The initial version is quite different because we have now a community for pet these owners, we are more understanding each other. And I believe in the future, PetPogo will grow up become a digital society for pets and the people. That's all. Thank you.

Okay. Got it. My next question will be about the R&D expenses declining a lot in the fourth quarter. So we would like to know if this will impact the company's ability of researching and developing new products.

No, the figures, the expenditures related to R&D figures tell us we improved our R&D efficiency. We are investing more efficiently in program management and also AI tools, some like AI coding, AI-coding program. All this improve our company R&D efficiency, improving. We invest R&D resources more on new business line as we say, and then more R&D research invest on PetPhone business. And then that investment in R&D is not enough. So this year, we will carry on investments in R&D for new business. As we are filing the 6-K in the last year, I think in October, we spin off PetPhone business as a separate subsidiary. So we have started to a new financings, raise finance for PetPhone business. So the PetPhone business will have -- I believe will have a new fundraising deal in this year sometime. So we will invest as a new fund on new business, that PetPhone business, PetPogo. So we will still invest increased investment on R&D for new business, invest on our new features.

We are more spending on rather than just traditional business.

Okay. Got it. Got it. My last question is that, can you elaborate on the reasons for the decline in product sales? Do you think this decline will continue?

Sorry, which one?

Yes. Can you elaborate on the reasons for the decline in product sales? Do you think this decline will continue?

Mobile broadband business decline -- sorry, which business are you?

Decline in product sales. Yes.

Sorry, can you say again?

Can you explain why the product sales declined? Like, do you think this decline will continue?

We disclose a little bit the revenues generated from mobile broadband hardware deliveries was a little bit declined last year. But the revenue -- the service revenues was increasing a little bit over the year 2024. As we disclosed, the MAUs, the metrics was increased about 10% over the last years, which will show our revenue -- service revenue related to this active user will come back to our account on recurring basis in the year 2026 and over. So as I would say, we -- the new growth engines came from the 3 -- the 4 new business lines, as I mentioned, IoT, PetPhone, SIM, Life service. So the mobile Wi-Fi, the legacy business as a contributor of cash flow for us to invest on our new business. So that's...

More comment because our current legacy product from international part is heavily impacted by the, I think, the economic tariff. For example, last year, so you can see in the last summer, it's our -- I think the travel is -- it's good season. But at the moment, we suffer from the earthquake rumors in Japan. So that's impact the first. The second, and also, we can see the Sino-U.S. trade war during the last -- middle of last year around June. So you can see the fourth quarter, we suffered from the China and the Sino and U.S. -- no, Sino and Japan relationship, and this year it's the same. So the fourth quarter we suffer from the Middle East war. So all these have an impact about the traveler, this part. But for the domestic part, it will still a stable growth. So we have to overcome the traveler business. That's very heavily impacted by the economic and the situation, the political situation worldwide. So if the worldwide situation getting better, I think this will regain the benefit. We will gain from this part.

There are no further questions at this time. I'll now hand back for any closing remarks.

Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact uCloudlink's Investor Relations through the contact information provided on our website or speak to our Investor Relations firm, Christensen Advisory. We look forward to speaking with you all again on our next quarterly call. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.