NEW YORK, Aug. 22, 2023 (GLOBE NEWSWIRE) -- Diamond Equity Research, a leading equity research firm with a focus on small capitalization public companies has released update note on uCloudlink Group Inc. (NASDAQ: UCL). The update note includes information on uCloudlink Group Inc.’s financial results, recent developments, risks, and our revised valuation framework.
The update note is available here. Highlights from the note include:
- Q2 2023 Revenues Slightly Above Expectations – uCloudlink reported its financial results for Q2 2023, with total revenues of $22.0 million, up 21.9% year over year, exceeding our estimate of $21.8 million. The increase was primarily due to a 25.2% YoY increase in services revenues driven by the gradual recovery of international travel, especially in the Chinese market, as well as a 16.5% YoY increase in product sales from an expanded product offering backed by the company’s patented cloud SIM technology and HyperConn solution. Overall gross margin was 44.9%, compared to 44.1% in the same period of 2022. Total operating expenses slightly increased from $8.3 million to $9.0 million as the company strengthened the sales force to promote its newly launched products, resulting in a net loss of $0.9 million, or $0.02 per basic and diluted ADS in Q2 2023 compared to a net loss of $6.3 million, or $0.22 per basic and diluted ADS in the year-ago period. The company provided guidance for Q3 2023 revenues of between $23.5 million and $24.5 million, in line with our current estimate of $23.7 million. We see the potential for UCL to continue this growth momentum and generate additional revenue with its improved R&D capabilities and diversified product offerings, as demand for international data connectivity services accelerates.
- New Product Launches and Developments Expanding Product Offering – UCL has recently launched a series of products to expand its product range, including the GlocalMe SIM card that allows users to obtain multiple global data plans covering 10 major destination countries on demand, and the world’s smallest GPS tracker-enabled Wi-Fi terminal that is being sold in a pilot. In addition, the company’s Internet of Things (IoT) modules are expected to be commercially embedded in the devices of a major MNO in Japan, creating another revenue stream to UCL’s business.
- Recovery in Outbound Travel Spurred Significant Growth in China – With the gradual recovery of international tourism since Q1 2023, China’s demands for international data connectivity services have increased significantly, which further boosted UCL’s 1.0 business revenue and sales of its Roamingman brand services. Mainland China contributed 11.6% of total revenues in Q2 2023, compared to 1.4% in the same period last year. We expect continued growth and additional customer acquisitions with the further return of international travel demand in China.
- Valuation Update – Our valuation for UCL remains $10.00, combining discounted cash flow and comparable company analysis, which is contingent on the company maintaining its successful execution.
About uCloudlink Group Inc.
uCloudlink operates as an innovative mobile technology company that offers the world’s first and leading mobile data traffic sharing marketplace to users globally, with aggregated mobile data allowances from over 369 MNOs (mobile network operator) globally. Leveraging its integral cloud SIM technology, it allows users to enjoy a smooth mobile connectivity experience without limitation to one MNO. uCloudlink was incorporated in 2014 and is headquartered in Hong Kong.
For more information, visit https://ucloudlink.gcs-web.com.
About Diamond Equity Research
Diamond Equity Research is a leading equity research and corporate access firm focused on small capitalization companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
Disclosures:
Diamond Equity Research LLC is being compensated by uCloudlink Group Inc. for producing research materials regarding uCloudlink Group Inc. and its securities, which is meant to subsidize the high cost of creating the report and monitoring the security, however the views in the report reflect that of Diamond Equity Research. All payments are received upfront and are billed for research engagement. As of 08/22/2023 the issuer had paid us $70,000 for our services, consisting of $20,000 for an initiation report and $15,000 for six update notes in the first year of coverage and $35,000 in the second year of coverage for update notes during the term, which commenced 06/01/2021 and is renewable annually. Diamond Equity Research LLC may be compensated for non-research related services, including presenting at Diamond Equity Research investment conferences, press releases and other additional services. The non-research related service cost is dependent on the company, but usually do not exceed $5,000. The issuer has not paid us for non-research related services as of 08/22/2023. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities including the complete loss of their investment. Investors can find various risk factors in the initiation report and in the respective financial filings for uCloudlink Group Inc.
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