NEW YORK, May 22, 2024 (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, management commentary, recent developments, outlook, risks, and our revised valuation estimates.
The update note is available here. Highlights from the note include:
- Q1 Earnings and Revenues Surpass Expectations - uCloudlink reported its financial results for Q1 2024, with total revenues of $18.1 million, up 0.7% year over year, exceeding our estimate of $17.8 million. The increase was primarily due to a 6.9% YoY increase in revenues from data connectivity services, which was driven by the continued recovery of its UCL 1.0 international data connectivity services business, and a 3.4% increase in revenues from PaaS and SaaS services, partially offset by a 9.8% decrease in products sales. Margin profile continued to improve in Q1 2024: overall gross margin was 55.2% versus 47.8% in Q1 2023, reaching a record high since FY2019, as high-margin UCL 1.0 and PaaS and SaaS businesses further contributed to the company’s revenue growth. Total operating expenses were $9.0 million compared with $7.6 million a year ago, primarily due to an increase in S&M expenses with the company launching new products in the quarter. UCL’s net income for Q1 2024 was $0.4 million, or $0.01 per basic and diluted ADS, versus $2.1 million or $0.06 per basic and diluted ADS in the year-ago period, beating our estimate of $0.1 million or $0.004 per basic and diluted ADS. We believe this growth momentum can potentially continue, as the company introduced new business lines to diversify revenue streams and expand market presence, while continuing to generate significant revenues from the resuming international data connectivity services business with further improved profit margins.
- GlocalMe Life Enables Access Within Broader Markets with Long-Term Growth Potential – UCL has made progress in rolling out innovative solutions in the quarter since it reorganized its business lines, such as GuardFlex Pro (GlocalMe Mobile/Fixed Broadband), a dual broadband CPE supporting reliable wireless connectivity that UCL showcased at MWC 2024, and a smart tracker, the company’s first soft-launched GlocalMe Life product that offers accurate tracking with proprietary connectivity and location technologies, compared to other similar tracking products only utilizing Bluetooth in market. GlocalMe Life appears to be another promising business beyond traditional UCL 1.0 and 2.0 data connectivity services, as it enables the company to tap into wide markets to engage with a broader end user base in more frequent daily life scenarios besides travel, such as item tracking, pet management, and emergency communication. UCL plans to unveil three GlocalMe Life products and an upgraded GlocalMe App on May 23 at VivaTech 2024 in Paris, with more Easy Life X series products under development. The company expects to generate meaningful revenues from the smart tracker and Easy Life X series products since Q3 2024, with recurring revenues from subscription and services anticipated in the future.
- Valuation Update – Our valuation for UCL remains $10.0, 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 382 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 05/22/2024 the issuer had paid us $140,000 for our research 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, third and fourth year of coverage for update notes during the terms, 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 05/21/2024. 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 potential 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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