Ucloudlink Group (NASDAQ:UCL) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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The full earnings call is available at https://edge.media-server.com/mmc/p/9m548n2x/

Summary

Ucloudlink Group reported total revenues of US$18.2 million for Q2 2026, impacted by macroeconomic headwinds and increased chip costs. However, the Ucloudlink 2.0 local data connectivity business showed strong growth, with GlocalMe IoT revenue increasing by 392.4% year over year.

The company highlighted strategic growth in new product lines, including GlocalMe IoT and UniCore Pro, achieving key milestones and increasing revenue contributions. The Pet AI ecosystem has also seen significant development, particularly in AI-powered pet care solutions.

Despite a net loss of US$3 million compared to a net income of US$0.7 million in Q2 2025, Ucloudlink Group expects revenue for Q3 2026 to be between US$19 million and US$22 million. The full-year 2026 revenue guidance has been revised down to US$75 million to US$85 million due to ongoing macroeconomic challenges.

Full Transcript

OPERATOR (Moderator)

Thank you for standing by and welcome to the Ucloudlink Group second 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. Daniel Gao, company IR. Please go ahead.

Daniel Gao, Investor Relations

Thank you. Hello everyone, and thank you for joining us on Ucloudlink Group's second quarter 2026 earnings call. The earnings release and our earnings presentation are now available on our IR website at ir.ucloudlink.com. Joining me on today's call are Mr. Zhi Ping Pong, Co‑Founder and Chairman of the Board of Directors, Mr. Chao Hui Chen, Co‑Founder, Director and Chief Executive Officer, and Mr. Yi Mengshi, Chief Financial Officer. Mr. Chen will begin with an overview of our recent business highlights.

Ms. 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 their cautionary statements, 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 statement as a result of new information, future events, changes in market conditions or otherwise, except as required by law.

Please also note that Ucloudlink Group'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 a reconciliation of their unaudited non‑GAAP measures to their most directly comparable unaudited GAAP measures. I will now turn the call over to Mr. Chen. Please go ahead.

Chao Hui Chen, CEO

Thank you, Daniel. Good morning or good evening, everyone. Total revenues for the quarter were US$18.2 million, reflecting the continued impact of macroeconomic headwinds, geopolitical tensions affecting outbound travel from China, and a significant surge in chip costs. Our Ucloudlink 1.0 international data connectivity services remain under pressure from these factors. However, this impact is increasingly being offset by the rapid scaling of our Ucloudlink 2.0 local data connectivity business, which delivered strong growth, particularly from our GlocalMe IoT business.

We expect our Ucloudlink 2.0 and new business lines to fully offset the continued contraction in our 1.0 international business by the third quarter. As we continue to execute on our strategic priorities, we continue to see strong momentum across our new product portfolio during the second quarter. GlocalMe IoT and UniCore Pro, in particular, gained solid traction with revenue contribution steadily increasing as the transition out of the initial market warm‑up phase.

Each reached key strategy milestones during the quarter, positioning us well for accelerated commercialization going forward across our new growth engines. Revenues from GlocalMe IoT and eSIM increased by 392.4% and 78% year over year, respectively. To drive early adoption and fuel market leadership, we maintained an elevated level of investment in marketing for the platform and Pet AI ecosystem during the quarter. I will now review the highlights for each of our key business lines.

I will start with the GlocalMe IoT, which saw its install base expand further, with monthly orders now contributing meaningfully to revenue and business operating profitability on a consistent basis. In the second quarter, revenue from the GlocalMe IoT grew 392.4% year over year. Our total install base reached 3.34 million units, and the MAU grew 210% year over year. User adoption is growing rapidly across key verticals as we further solidify our position in high‑growth sectors, including in‑car infotainment and security cameras.

Moving on to our platform ecosystem, which has undergone a comprehensive upgrade into a dedicated Pet AI agent building on the AI‑powered social model we pioneered in the fourth quarter. This marks a major step forward in functionality and performance, redefining AI‑powered communication between humans and their pets. The agent can precisely sense a pet's condition and emotional state and intelligently support owners at every stage of care from prevention through real‑time response and engagement, delivering a seamless pet care experience.

This powerful agent creates enormous opportunities across pet health, veterinary care, pet safety and pet data analytics, each of which we see as a source of new value creation. As consumer acceptance of AI pet services grows, we expect to build both a valuable data asset and a leading position in Pet AI. We are now extending our Pet AI capabilities across communication, safety and health management. On the marketing front, we have made significant progress in branding and promotional efforts, generating substantial external attention, with select content pieces reaching tens of millions of views on major platforms such as TikTok and Instagram.

We look forward to achieving even greater breakthroughs in the second half of the year. Turning to our GlocalMe Life and eSIM business line, where our strategy is beginning to generate results. GlocalMe Life solutions saw DAU growth explode, increasing by 801.6% year over year, reflecting strong market adoption of the new product line. GlocalMe eSIM continued to steadily expand as well, with DAU increasing 132% year over year. Our eSIM solution is gaining strong momentum, leading the market in China and building market share steadily across East Asia and the wider Asia‑Pacific region.

Together, these results show two product lines at different stages of maturity, with GlocalMe Life growing rapidly with exceptional triple‑digit growth and GlocalMe eSIM scaling consistently. Our premium G50 Max is the world‑pioneering sky‑to‑ground integrated mobile connectivity hub, delivering seamless connectivity across satellite, flight and ground networks. It offers the broadest 5G country coverage in the industry, spanning nearly 100 countries, and performs reliably across a wide range of scenarios from the urban environment to in‑flight travel.

Powered by our AI HyperConn technology, the G50 Max has built a market‑leading position in the US$500‑plus premium MiFi segment and has set a new benchmark for premium mobile connectivity solutions. While our Ucloudlink 1.0 international data connectivity business has been affected by macro headwinds, these same conditions have created new opportunities for the G50 Max and the premium solution, driving demand for resilient, reliable connectivity in critical environments.

We also made solid progress and created new and strong revenue with our newly launched 4G and 5G CPE products during the second quarter for local connectivity services. Both have demonstrated stable performance and successfully passed smaller‑batch market validation, receiving positive market feedback. Several large orders are currently under negotiation, and we expect to accelerate market deployment and drive stronger growth in Q3. We also achieved notable recognition during the quarter, winning the Customer Impact Award at the MVNOs Awards in 2026 and being shortlisted for Leading Consumer MVNO Startup Brand, further validating our technology leadership and market positioning. Looking ahead, we remain focused on strengthening operational management and cost discipline, with a clear priority on improving cash flow. Together with the ongoing commercial progress of the Pet AI and social platform, the ramp‑up of G50 Max, and the continued expansion of GlocalMe IoT, CPE R50 and R55, we believe these efforts will position us to navigate the current market environment and emerge stronger. We remain committed to bridging the digital divide in cross‑border connectivity, as well as the emotional distance between people and their pets, while creating long‑term value for our shareholders.

With disciplined optimism in mind, we are confident that we have the right strategy in place to drive sustainable growth going forward. I will now turn the call over to Ms. Shi.

Yi Mengshi, CFO

Thank you, Mr. Chen. Hello everyone. I will go over our operational and financial highlights for the second quarter of 2026. Average Daily Active Users and Monthly Active Users represent the average number of unique users engaging with our GlocalMe service on a daily and monthly basis, respectively. Both metrics recorded robust growth in the second quarter. Average DAUs in the second quarter were 376,000 and 376, representing an increase of 13.3% from 332,323 in the second quarter of 2025.

GlocalMe IoT, GlocalMe SIM and GlocalMe Life all achieved potential growth, with average DAUs up 277.3%, 132% and 801.6%, respectively, from the same period last year. Average DAU from our GlocalMe G50 business declined by 7.3% year over year. Average MAUs were 744,000 and 966, representing an increase of 6.6% from 698,862 in the second quarter of 2025. Average MAUs from our GlocalMe IoT, GlocalMe SIM and GlocalMe Life business lines saw increases of 210%, 53.8% and 599.7%, respectively, from the same period last year.

Average MAUs from our GlocalMe G50 business decreased by 10.1% year over year. In the second quarter of 2026, average DATs were 341,511, with 12,763 owned by the company and 328,748 not owned by the company, representing an increase of 7.4% from the second quarter of 2025. During the quarter, 56.3% of DATs were from Ucloudlink 1.0 international data connectivity service and 43.7% were from Ucloudlink 2.0 local data connectivity service. In June 2026, the average daily data usage per terminal was 1.5 gigabytes.

Average DATs in the second quarter were 306,382, representing an increase of 6.5% from 663,197 in the second quarter of 2025. Growth was driven by strong momentum across our three new growth engines, with average DATs from GlocalMe IoT, GlocalMe SIM and GlocalMe Life increasing 93.6%, 35.4% and 843.2%, respectively, from the same period last year. Average MATs from GlocalMe G50 business decreased by 5.7% year over year following the stable growth last year.

Platform continued to gain traction, with user adoption and engagement increasing further during the quarter. In the second quarter, average DAU and MAUs were 1,519 and 1,845, respectively, while average DATs and MATs for platforms reached 507 and 1,028, reflecting the growing traction of this new offering. As of June 30, 2026, the company had 212 patents, with 184 approved and 28 pending approval, and approved use of SIM cards from 398 MNOs globally.

Total revenue for the second quarter of 2026 was US$18.2 million, representing a decrease of 5.9% from US$19.4 million in the same period of 2025. Total revenue across different business lines was as follows: GlocalMe G50 business US$15.5 million, representing a decrease of 13.1% from US$17.9 million in the second quarter of 2025; GlocalMe SIM business US$1.3 million, representing an increase of 78% from US$0.7 million in the second quarter of 2025; GlocalMe IoT business US$0.8 million, representing an increase of 392.04% from US$0.2 million in the second quarter of 2025; GlocalMe Life business US$0.5 million, representing a decrease of 12.1% from US$0.6 million in the second quarter of 2025; Petphone business US$0.2 million, representing an increase of 1,527.3% from US$0.01 million in the second quarter of 2025. Revenue from services was US$13.3 million, representing a decrease of 9.2% from US$14.6 million in the same period of 2025.

Revenue from services contributed 72.0% of total revenue during the second quarter of 2026, compared to 75.5% in the same period last year. Geographically speaking, during the second quarter of 2026, Japan contributed 36%, mainland China contributed 30.3%, North America contributed 13.5%, and other countries and regions contributed the remaining 20.2%, compared to 33.6%, 33.2%, 15.3% and 17.9%, respectively, in the same period of 2025. Our gross profit was US$9.2 million compared to US$10.2 million in the same period of 2025.

Overall gross margin in the second quarter of 2026 was 50.2% compared to 52.8% in the same period of 2025. Gross margin on services was 59.1% in the second quarter of 2026 compared to 56.6% in the same period of 2025. Excluding share‑based compensation, total operating expenses were US$11.5 million compared to US$10.1 million in the same period of 2025. Net loss in the second quarter of 2026 was US$3 million compared to net income of US$0.7 million in the same period of 2025.

Adjusted EBITDA was negative US$1.8 million in the second quarter of 2026 compared to a positive US$0.4 million in the same period of 2025. For the second quarter of 2026, we recorded an operating cash outflow of US$3 million compared to an outflow of US$0.9 million in the same period of 2025. For the second quarter of 2026, our capital expenditures were US$0.04 million compared to US$0.2 million in the same period of 2025. Turning to balance sheet items, our cash and cash equivalents were US$25.2 million as of June 30, 2026, compared to US$28 million as of March 31, 2026.

We continue strengthening our financial position, and we believe we are well positioned to drive growth in our business. Turning to our outlook for the third quarter of 2026, we expect revenue to be between US$19 million and US$22 million, representing a decrease of 10.4% to an increase of 3.8% compared to the same period of 2025. For the full year 2026, we now expect total revenue to be in the range of US$75 million to US$85 million, compared with the range of US$85 million to US$100 million we previously announced.

We are revising our full‑year guidance in light of the persistent macroeconomic challenges and global trade headwinds, which have had and may continue to have a broader impact across industries. This estimate reflects our current view on market and operating conditions and customer demand, which are subject to change. With that, operator, let's open it for Q&A.

OPERATOR (Moderator)

Thank you. 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 the handset to ask your question. Your first question comes from Theodore O'Neill with Litchfield Hills Research. Please go ahead.

Theodore O'Neill, Analyst at Litchfield Hills Research

Oh, thank you for taking my questions. I have two questions this morning. The first is about memory chips and sort of the supply chain of semiconductors in general. You cited here, which everyone has been seeing, as memory chip cost increases. So what are you doing to ameliorate that, and are you seeing other issues in other supply chain issues in the semiconductor area as well?

Chao Hui Chen, CEO

Yeah, I think there are several impacts, because I think the supply chain for chipsets and AI volume demand for supply chain in China for the memory chip, everyone knows, is almost five to ten times increase. It impacts our sales price, you know, for the consumer, our customer. So in the early quarter we increased more storage to try to offset the price increasing first. You can see that's why our cash flow was somewhat impacted, because we increased the memory chip storage first.

And second, you can see we have to cover some chipset cost increasing. I think also in the second half year, just about several months later, we increased our sale price, but we have to consider the customer acceptance of the price. That's number two. And number three, also we have R&D, you know, revised for some large memory and expensive memory. We try to revise our hardware, try to minimize, I think to reduce, the memory requirement. That's number three.

And finally, also like PCB, like all these components, I think the period and the cost also is going up. I think indeed this year is worse in supply chain for our product, for like MiFi, like our pet phone, and the impact to the customer.

Theodore O'Neill, Analyst at Litchfield Hills Research

Thank you. My other question is about the local GlocalMe Life business. Here in the prepared remarks, GlocalMe Life business revenue decreased year over year, but the average daily active users increased over the same period. So were they spending less money? I was wondering if you could explain why one's down, the other's up.

Yi Mengshi, CFO

Yeah, sure. As to the second quarter figures, the Life revenues include two parts. One part is the hardware of Life delivered to our customers. So that hardware, the volume hardware delivery in second quarter is a little bit down a bit, so that accounts for the total revenues a little bit down. But we delivered Life products in the past series quarters on a stable gross volume, and this Life product is used in the local scenarios, local mobile broadband scenarios, like our products charge cables that's very well welcomed in Japan's local market.

So the MAUs figures reflect cumulative active historical sold hardware of Life, so that cumulative MAUs metric increased dramatically compared with last year's. So there are two figures, two metrics: one, revenue reflects the second quarter scenarios; the MAUs reflects the cumulative, the whole historical sales stories.

Chao Hui Chen, CEO

Yeah, yeah, I have more comment about this, because for Life, this product, I think, because I just mentioned, as you mentioned, the supply chain impact by the AI industry because of the memory chip and the PCB, et cetera. That's why in the fourth quarter before the price increase we asked our customer give more order, and so far I think this is why in the fourth quarter we got more bigger order, and the second quarter order is a little bit lower.

The second quarter you can see the order is lower. That's because of the supply chain impact and the price increase. But the total the first half year, comparing the first half last year, is increased dramatically.

Theodore O'Neill, Analyst at Litchfield Hills Research

Okay, thank you very much. That answers my questions.

OPERATOR (Moderator)

Once again, if you wish to ask a question please press star‑one on your telephone and wait for your name to be announced. There are no further questions at this time. I'll now hand back to Daniel Gao for closing remarks.

Daniel Gao, Investor Relations

Okay, 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. We look forward to speaking with you again on our next quarterly call. Thank you.

OPERATOR (Moderator)

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.