Ucloudlink Group Q3 2026 Earnings Call Transcript

Ucloudlink Group (NASDAQ:UCL) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

View the webcast at https://edge.media-server.com/mmc/p/ppmebvna/

Summary

Ucloudlink Group Inc. reported third quarter 2026 revenues of $21.4 million, marking a 1.1% year-over-year increase, driven by strong product sales growth of 330.8%.

The company achieved positive operating cash flow for the first time this year with a cash inflow of $1.1 million, supporting a solid financial foundation.

Impressive growth was reported in the global IoT business with revenue surging 496.5% year over year; similarly, the SIM/eSIM business showed a 40.3% growth.

Management emphasized strategic expansion in premium mobile connectivity and local broadband solutions, leveraging AI-powered HyperConn technology.

Ucloudlink outlined positive future outlook with expected revenue growth acceleration in Q4 2026, projecting revenues between $22.5 million and $25.5 million.

The company maintained disciplined operating management, reducing headcount and investing in new business lines such as PETCO, while applying AI tools to enhance efficiency.

Average DAUs and MAUs saw significant growth in new business lines, offsetting declines in Global Mobile due to macroeconomic and geopolitical headwinds.

Full Transcript

OPERATOR

Thank you for standing by and welcome to the Ucloudlink Group Inc. third quarter 2026 earnings conference call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Liam Scheer with company IR. Please go ahead.

Liam Scheer (Investor Relations)

Hello everyone and thank you for joining us on Ucloudlink Group’s third quarter 2026 earnings call. The earnings release and our earnings presentation are now available on our IR website. Joining me on today’s call are Mr. Zhi Ping 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 the 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 statement, 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 the reconciliation of the unaudited non‑GAAP measures to the most directly comparable audited GAAP measures. I will now turn the call over to Mr. Chen. Please go ahead.

Chaohui Chen (Chief Executive Officer)

Thank you, Liam, and good morning or evening, everyone. Our third quarter results mark a meaningful turning point for us. As anticipated, our total revenues regained positive growth momentum on a year‑over‑year basis, landing at the high end of our guidance range. Despite macro headwinds, geopolitical tensions, rising memory chip costs and extended component lead times, we demonstrated the resilience of our business model with robust growth across our emerging new business lines.

Importantly, we generated positive operating cash flow — a cash inflow of US$1.1 million — for the first time this year, further strengthening our financial foundation. Before I dive into the business lines, I want to share a strong belief of ours: good connectivity is the foundation of artificial intelligence. This is especially true when reliable networks are critical for safety during turbulent periods marked by natural disasters or conflicts. Driven by this vision, we achieved key commercial breakthroughs across our businesses during the third quarter. I will now review the highlights for each key business.

First, in our Mobile business we rapidly capitalized on two strategic opportunities. The first was in our premium segment, where our … G50 MAPP with AI‑powered HyperConn technology — the world’s leading sky‑to‑ground integrated mobile connectivity hub — generated better‑than‑expected sales, demonstrating that demand for premium solutions remains highly resilient to macro headwinds. The second was in local connectivity markets, where our latest 4G/5G CPE solutions delivered strong sales growth and deepened our penetration.

Powered by the same AI‑powered HyperConn technology, which provides intelligent switching between fixed and mobile networks and real‑time congestion detection, the solution delivers highly reliable connectivity for home and office environments. This reinforced our local broadband strategy and allowed us to expand beyond one‑time hardware sales into recurring data connectivity revenue. Next is our global IoT business, which achieved impressive momentum with revenue surging 496.5% year over year. Growth was driven by the accelerating deployment of our integrated data connectivity solutions across a growing installed base of smart devices, particularly in key sectors such as in‑car infotainment and security cameras. As this installed base expands and data usage increases, recurring data connectivity revenue is expected to scale.

We remain well positioned to capture further demand as smart hardware partners rapidly extend their international footprint. Our SIM/eSIM business forms another key growth driver. Our OTA and eSIM solutions ranked among the top 10 products on major Chinese e‑commerce platforms for key Asia‑Pacific travel routers. Further demonstrating our technological strengths, the eSIM trico‑core developed with mobile virtual network operator and mobile network operator partners leverages our hardware‑based multi‑IMSI capability to provide enhanced security and coverage for domestic and overseas use.

In addition, our global midline business achieved steady MAU growth with its key solution Unicorn Pro gaining strong momentum. Before closing, I want to highlight our platform PETCO ecosystem. We continue to evolve our AI‑powered social model. Unlike single‑function devices on the market, PETCO operates like a mobile phone, enabling anytime‑anywhere two‑way communication between pets and their owners. We launched our pet AI agent on the PETCO app and the device, and our next‑generation pet cam and AI‑powered cameras are in the final stage of development and are set to launch in the fourth quarter.

Following several quarters of significant marketing investment, the platform’s consumer value proposition is now materializing and gaining meaningful market traction. We are receiving highly positive feedback both at major offline events such as IFA 2026 and from users and influencers across leading global social media platforms. Our distribution is expanding as well. In Europe, we have placed PETCO in a retail network of regional telecom operators.

In China, we have been added to the centralized procurement catalog of three major telecom operators, which facilitates SIM issuance and helps build our own partner ecosystems. Looking ahead, we expect our revenue growth momentum to continue and further accelerate in the fourth quarter on a year‑over‑year basis, delivering a higher growth rate than what we achieved in the third quarter. To achieve this, our focus will be on executing our strategic priorities to drive sustainable growth. We will continue to invest in R&D and marketing to scale our business lines while maintaining disciplined operating management to improve operating leverage.

The share repurchase program announced in the third quarter reflects management’s confidence in our long‑term fundamentals. We believe our solid execution and continued innovation will position us well to deliver long‑term value to our shareholders. I will now turn the call over to Mr. Shi.

Yimeng Shi (Chief Financial Officer)

Thank you, Mr. Chen. Hello everyone. I will now go over our operational and financial highlights for the third quarter of 2026. First, let’s look at user metrics. Both average daily active users, or DAUs, and average monthly active users, or MAUs, recorded robust growth. Average DAUs reached 431,000, up 22% year over year. This growth was largely driven by strong momentum in our new business lines. Specifically, DAUs for Global … IoT, … SIM, … Life and platform businesses increased by 271.4%, 142.1%, 840% and 572.9%, respectively. Average DAUs from our Global Mobile business declined by 6.4% year over year, reflecting softer outbound travel demand from China amidst macroeconomic headwinds and geopolitical uncertainties.

Average MAUs were 867,935, up 14% year over year, fueled by broad‑based growth across our new emerging business lines, led in absolute terms by … IoT and … SIM businesses, which surged 241.8% and 67%, respectively. This fully offset the 10.3% decline in Global Mobile MAUs, which continued to face external supply and macro pressures. Finally, on technology assets, as of September 30, 2026 we had 184 approved patents and 33 patent applications pending approval, and a global SIM pool covering 396 MNOs.

Moving to our financial results, total revenue for the third quarter was US$21.4 million, up 1.1% year over year and at the high end of our guidance, mainly driven by strong product sales growth of 330.8% year over year. Breaking this down, while our Global Mobile service faced macro headwinds, we saw robust consumer demand for our premium and local connectivity solutions. Rather than being just standalone product sales, these hardware deployments are strategic catalysts that pave the way for ongoing recurring data connectivity revenue as users engage with our network.

Meanwhile, our new emerging business lines continued to expand rapidly. Our … SIM business revenue grew 40.3% year over year, while … IoT business grew a remarkable 496.5%. … Live business grew 189.9%, and the platform business grew 285%. Revenue from services was US$16.0 million, contributing 74.9% of total revenue, compared with 80.6% last year. Even so, our service gross margin improved to 50.3% from 56.6%. Our connectivity business overall gross margin was 51.8%, reflecting the higher share of product sales in the mix this quarter.

Looking at profitability, operating expenses excluding share‑based compensation were held broadly flat at US$11.5 million. Our net loss narrowed sequentially to just US$0.3 million. Our adjusted EBITDA was negative US$0.2 million. Our cash flow and balance sheet remain very healthy. We generated an operating cash inflow of US$1.0 million this quarter, our first positive quarter this year, and a significant turnaround from a US$0.9 million outflow in the same quarter of last year. Capital expenditure was US$0.1 million. Our cash and cash equivalents increased to US$26.8 million from US$25.2 million last quarter, giving us a solid financial foundation to support our growth initiatives.

Turning to our outlook for the fourth quarter 2026, we expect revenue to be between US$22.5 million and US$25.5 million, representing a year‑over‑year increase of 1.8% to 15.4%. Looking at the full year, we now expect total revenue for 2026 to range between US$79 million and US$82 million. This lowers our previous guidance range of US$75 million to US$85 million. This guidance reflects our current view of the market, operating conditions as well as customer demand.

These estimates are subject to change. With that, operator, let’s open for Q&A.

OPERATOR

Certainly. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up your handset to ask your question. Your first question comes from Theodore O’Neill with Litchfield. Please go ahead.

Theodore O’Neill (Analyst)

Thank you very much, and congratulations on a good quarter. My first question is about your gross profit margins, which were up sequentially for the third quarter in a row. Given that so many other manufacturers are struggling with the cost for components for memory chips, I was wondering if you could give us some insight into how you were able to achieve this growing gross profit margin in the face of what for everyone else is rising underlying component costs?

Yimeng Shi (Chief Financial Officer)

Yes. As we disclosed, our service gross margin is improving compared with last year’s. I think the reasoning behind this improvement is we deliver quality premium service to the market and we are managing the costs on track, and also we improved operational efficiencies to support this improvement. For instance, as we disclosed, the capital investment is a small amount. We invest in our equipment renting for the service, for this roaming service, so the rental cost of rental equipment devices narrowed down to small levels.

All this contributes to our improving service margins. And for the hardware side, we are impacted by the supply chain cost up, and that lowered our hardware margins to lower levels. But overall, combined together, our gross margin is more than 51%. I think that’s a good result we delivered in the third quarter. By the way, we redesigned some hardware to reduce the memory chip usage and try to reduce the impact from IC costs — for example, memory size — to minimize the impact.

Theodore O’Neill (Analyst)

Okay, thank you. The R&D expenses were up year over year, and I was wondering, at the current rate, US$1.9 million, is that sort of the level we should expect going forward into Q4? And the same question for sales and marketing expense, which also increased — is that at a level, or is that going to go up some more? Do you have more shows that you’re going to attend?

Yimeng Shi (Chief Financial Officer)

Yes, we disciplined our cost management budget in the third quarter. In the third quarter we reduced headcount by about 30 staff. This cost reduction will reflect in our third quarter and the following periods. And yes, in the third quarter our sales and marketing expenses increased year over year. We still invest in our brand‑new platform business in overseas markets on online platforms, and that attracted very good, wide‑spreading feedback from the online platforms.

So that’s why we still increased sales and marketing budgets on the new platform business. Same for R&D budgets — we put more weight on these expenses onto the new business, say the PETCO business as well. And as you see, the new business increased very, very fast. This investment is for the future. We believe this investment for the future will have a return in coming quarters and next years.

Chaohui Chen (Chief Executive Officer)

By the way, we are not just trying to reduce staff. In Q1 and Q2 we applied a lot of AI tools, so they started to take effect and get more efficient in R&D, customer and sales sides. So that’s the key reason.

Theodore O’Neill (Analyst)

Okay, that answers my questions. Thank you very much.

Chaohui Chen (Chief Executive Officer)

Thank you.

OPERATOR

There are no further questions at this time. I’ll now hand back to Mr. Liam Scheer for closing remarks.

Liam Scheer (Investor Relations)

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

OPERATOR

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.