NEW YORK, May 23, 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 Returning to Profitability for the First Time Since 2020 - uCloudlink announced its financial results for Q1 2023, with total revenues of $18.0 million, up 15.3% year over year, exceeding our estimate of $17.9 million. The increase was primarily due to a 31.4% YoY increase in revenue from services, as revenues from both international and local data connectivity services grew aided by the gradual recovery of international travel and the continuous development of the company’s local data connectivity business. Overall gross margin was 47.8% compared to 37.4% in the same period of 2022, primarily due to a greater mix of services. UCL’s operating expenses decreased significantly from $10.1 million to $7.6 million as the company streamlined its cost structure, with a net income of $2.1 million, or $0.06 per basic and diluted ADS in Q1 2023, exceeding our estimate of a net loss of $0.7 million, or $0.02 per basic and diluted ADS. UCL’s return to profitability in Q1 2023 is in line with our expectations. We believe this growth momentum has the potential to continue as the company optimizes its operating efficiency through effective cost control while launching new products with its innovative HyperConn Technology in 2023 and generating greater revenue from the resuming international data connectivity business during peak tourist seasons.
PaaS and SaaS Business Continuing to Expand - UCL reported revenue from PaaS and SaaS services of $2.6 million, up 3.7% YoY, with the average daily active terminals reaching a record high of more than 300,000 in Q1 2023. We expect this business to continue to expand given the company’s continuous development in its PaaS and SaaS ecosystem and accelerated demand across the global market.
UCL Keeps Generating Positive Operating Cash Flow Strengthening its Financial Position - As of March 31, 2023, uCloudlink’s cash and cash equivalents and short-term deposits were $16.7 million, compared to $15.1 million as of December 31, 2022. The company has achieved positive operating cash flow sequentially since Q2 2022, demonstrating UCL’s ability to achieve financial sustainability to support its long-term operations and growth. The company’s asset-light operating model and continuous positive operating cash flow strengthened its balance sheet.
• Valuation Adjusted to $10.0 - UCL’s beating on revenue and EPS strengthens investors’ confidence and reinforces our view that shares trading at a materially lower valuation compared with peer communication services companies may not be long-term. We have raised UCL’s valuation to $10.0, 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 351 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. As of 05/23/2023 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 in the first year of coverage and $35,000 in the second and third year of coverage for update notes during the annual terms, 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 05/23/2023. 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.
Contact:
Diamond Equity Research
research@diamondequityresearch.com
A PDF accompanying this release can be found at:
http://ml.globenewswire.com/Resource/Download/83fee8a3-e40f-4658-a0cd-97039c5b4725
