Diamond Equity Research Releases Update Note on uCloudlink Group Inc. (NASDAQ: UCL)
NEW YORK, Nov. 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, management commentary, recent developments, outlook, risks, and our revised valuation estimates.
The update note is available here. Highlights from the note include:
UCL Surpasses Q3 Earnings and Revenue Estimates - uCloudlink reported its financial results for Q3 2023, with total revenues of $23.9 million, up 31.0% year over year, exceeding our estimate of $23.7 million. The increase was primarily due to a 31.9% YoY increase in services revenues driven by the accelerated recovery of international travel and a 29.0% YoY increase in product sales from an expanded product offering backed by the company’s cloud SIM technology and HyperConn solution. Overall gross margin was 51.2%, compared to 47.7% in the same period of 2022. Total operating expenses increased from $7.9 million to $9.2 million, as the company strengthened its sales force to promote its newly launched products. UCL’s net income was $3.5 million, or $0.09 per basic and diluted ADS, in Q3 2023, beating our estimate of $0.45 million or $0.01 per basic and diluted ADS. This compares to a net loss of $4.6 million, or $0.15 per basic and diluted ADS a year ago. We model steady growth in the company’s core UCL 1.0 business and product sales, driven by the accelerated recovery of international travel and new product launches to capture market share. Meanwhile, the company has the potential to expand profit margins and further improve profitability through a diversified product mix.
New Products Launched Offering Long-Term Growth Potential – The company launched various new products during the quarter, bringing its average daily active terminals to a record high of 325,078, with its market share continuing to soar. The new products including what the company believes is the world’s smallest GPS-enabled portable Wi-Fi terminal and the GlocalMe SIM card that allows users to obtain multiple global data plans covering ten major destination countries on demand. The company aims to improve user experience and expand market share by upgrading product features – adding AI services to its Wi-Fi products, which have been popular with Chinese outbound tourists. Although Chinese outbound travel remained soft, UCL’s market share has increased significantly there, with its revenues from mainland China accounting for 17.2% of total revenues in the quarter, compared to 2.4% in the same period last year.
Progress in IoT and Fixed Broadband Unlocking Additional Opportunities – In Q3 2023, a major MNO’s devices utilizing UCL’s cloud SIM technology-powered IoT solutions entered the Japanese market, marking the company’s significant progress in the IoT field. UCL is expected to work with major IoT module manufacturers on integrated cloud SIM technology and prepares to launch 5G Customer Premises Equipment (CPE), a new offering to meet the fast-growing demand for home and office internet connectivity, which is seeking to gain additional market share in the fixed broadband market.
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 367 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. 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 11/22/23 the issuer had paid us $105,000 for our research services, consisting of $20,000 for an initiation report and $15,000 for six update notes and $35,000 in the second and third year of coverage for update notes during the term, which commenced 06/01/2021. 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 11/22/23. 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. and investors should read full disclosures found in the research report.
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