Diamond Equity Research Releases Update Note on uCloudlink Group Inc. (NASDAQ:UCL)
NEW YORK, Nov. 18, 2022 (GLOBE NEWSWIRE) — Diamond Equity Research, a leading equity research firm specializing in small-cap public companies, has released an update note on uCloudlink Group Inc. ( NASDAQ:UCL). The release note includes information on uCloudlink Group Inc.’s financial results, management’s comments, recent developments, outlook, risks and our revised valuation estimates.
The patch note is available here. Note highlights include:
Effective cost control and improved margin profile contributed to increased profitability – uCloudlink reported its financial results for the third quarter of 2022, with total revenue of $18.2 million, down 5.7% from $19.3 million in the same period last year. The decline was primarily due to a 36.7% year-over-year decline in product sales revenue to $5.6 million (due to lower sales of certain terminals and data-related products), partially offset by an increase in service revenues, which increased by 20.5% year-on-year. to $10.5 million as revenue from international and local data connectivity services increased, helped by the gradual resumption of international travel and the continued development of the company’s local data connectivity business. The margin profile improved in the third quarter of 2022 in line with our expectations: the overall gross margin was around 47.7% compared to 28.3% in the same period of 2021, reaching record levels since fiscal 2020 Gross margins on services and product sales increased primarily due to algorithm optimizations and more efficient use of data, hardware and product design upgrades, as well as an increased proportion of revenue from international data connectivity service and premium products. UCL’s operating expenses fell $12.7 million to $7.9 million as the company streamlined its cost structure, resulting in positive adjusted EBITDA and a reduced net loss of $4.6 million. dollars, or $0.15 per basic and diluted ADS in Q3 2022, which is consistent with our model. We expect UCL’s profitability to continue to improve as the company generates more revenue from the recovery of the international data connectivity business with higher gross margins, while continuing to optimize its operational efficiency through certain cost control measures.
Demand has driven significant growth in the North American market – With the revival of international tourism and the popularity of remote working/learning in the post-epidemic era, the demands for international and local data connectivity services have increased significantly, especially in the North American market, which further boosted UCL’s growth and helped it gain market share. According to the company, Japan and mainland China contributed 35.1% and 2.4% of total revenue in Q3 2022, while other countries contributed the remaining 62.5%, down from 46.6%. , 3.7% and 49.7%, respectively, in the third quarter of 2021. The increase in the proportion of revenues from other countries and regions is mainly attributable to revenue growth in North America, where we expect a continuous growth and the acquisition of new customers.
Sustained Positive Operating Cash Flow Supporting Long-Term Growth – As of September 30, 2022, uCloudlink’s cash and cash equivalents and short-term deposits were $12.5 million, compared to $12.2 million as of June 30, 2022. The company realized a cash flow positive operating cash flow for the second consecutive quarter since the second quarter of 2020 during the COVID-19 pandemic, demonstrating UCL’s ability to achieve financial sustainability to support its operations and long-term growth. In October 2022, UCL announced the early redemption of $1 million principal amount of the convertible debentures for a total redemption amount of $1,053,384, including accrued and unpaid interest, with nil outstanding convertible debentures.
Evaluation – We have adjusted UCL’s valuation to $10.0, by combining discounted cash flow and peer analysis, which is dependent on the company maintaining successful execution.
About uCloudlink Group Inc.
uCloudlink operates as an innovative mobile technology company that offers the world’s first and largest mobile data traffic sharing marketplace to users worldwide. Leveraging its cloud-integrated SIM technology, it enables users to enjoy a smooth mobile connectivity experience without limitation to a single 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 company access firm focused on small cap companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
Diamond Equity Research LLC is compensated by uCloudlink Group Inc. for producing research papers regarding uCloudlink Group Inc. and its securities, which aims to subsidize the high cost of report creation and security monitoring, but the points view of the report reflect that of Diamond Equity Research. All payments are received in advance and are charged for the research engagement. As of 11/18/2022, the issuer has paid us $70,000 for our services, or $20,000 for an initiation report and $15,000 for six release notes in the first year of coverage and $35,000 the second year of coverage for the release notes during the term, which began on 06/01/2021 and is renewable annually. Diamond Equity Research LLC may be compensated for non-research related services, including presentations at Diamond Equity Research investment conferences, press releases and other additional services. The cost of non-research services depends on the company, but generally does not exceed $5,000. The issuer has not paid us for non-research related services as of 11/18/2022. Issuers are not required to engage us for these additional services. Additional charges may have accrued since then. Although Diamond Equity Research sponsored reports are based on publicly available information and although no investment recommendations are made in our company sponsored research reports, given the small capitalization nature of the companies that we cover, we have adopted a procedure for internal dealings around the public companies through which we are engaged, with investors able to find such a policy on the public disclosure page of our website. This report and this press release do not take into account individual circumstances and do not take into account the individual preferences of investors. The statements contained in this report may constitute forward-looking statements, these statements involve numerous risk factors and general uncertainties regarding the business, industrial and macroeconomic environment. Investors should be aware of the high degree of risk of small cap stocks, including the complete loss of their investment. Investors can find various risk factors in the Initiation Report and in the respective financial documents of uCloudlink Group Inc.
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