Diamond Equity Research Releases Update Note on uCloudlink Group Inc. (NASDAQ: UCL)
NEW YORK, March 24, 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, management commentary, recent developments, outlook, risks, and our revised valuation estimates.
The update note is available here. Highlights from the note include:
Gradual Resumption of International Travel Boosting UCL’s Top-line Growth - uCloudlink announced its financial results for Q4 2022, with total revenues of $19.6 million, up 11.6% compared to $17.6 million in the same period last year, bringing total revenues for the full year 2022 to $71.4 million. The increase was primarily due to a 30.3% YoY increase in revenue from services as revenues from both international and local data connectivity services grew significantly aided by the gradual recovery of international travel and the continuous development of the company’s local data connectivity business. Margin profile continued to improve in Q4 2022: overall gross margin was 51.3% compared to 31.0% in the same period of 2021, reaching record highs since FY2020. UCL’s operating expenses decreased from $12.1 million to $11.2 million, as the company streamlined its cost structure, leading to a narrowed net loss of $1.1 million, or $0.03 per basic and diluted ADS in Q4 2022, which is in line with our model. We believe this growth momentum is likely to continue in 2023 as more countries lift COVID-related travel restrictions and reopen borders, which could accelerate the recovery of international travel and further stimulate demand for international data connectivity services. UCL 1.0 as a higher-margin business line is anticipated to continue to be a key growth driver for the company and help improve profitability. We model the company returning to profitability as early as Q2 2023 potentially, while it continues to optimize its gross margins and operating efficiency.
Upcoming UCL 3.0 Business and Various New Product Launches Providing Additional Growth Potential – According to the management, the company plans to initiate its UCL 3.0 business, a new mobile data traffic sharing marketplace application “GlocalMe App” that capitalizes scalable user base accumulated through UCL 1.0 and 2.0 and supports different application scenarios without limitation of the device. GlocalMe App enables users to share and trade unused mobile data by allocating multiple SIM cards from different operators remotely and dynamically. Additionally, the company plans to launch more CloudSIM and HyperConn enabled products and IoT solutions to meet the diversified needs of enterprise and individual customer, which will further expand UCL’s potential user base and market share.
Healthy Balance Sheet Supporting UCL’s Further Growth and Business Expansion - As of December 31, 2022, uCloudlink’s cash and cash equivalents and short-term deposits were $15.1 million, compared to $12.5 million as of September 30, 2022. The company has achieved positive operating cash flow sequentially since Q2 2022, demonstrating UCL’s ability to achieve financial sustainability to support its further growth and business expansion. The company’s asset-light operating model and continuous positive operating cash flow help it maintain a healthy balance sheet.
Valuation – We have adjusted UCL’s valuation to $9.0, 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 337 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 research provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
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 03/24/2023 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 03/24/2023. 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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