Prepared remarks
Thank you for standing by, and welcome to the uCloudlink Second Quarter 2026 Earnings Conference Call. I would now like to hand the conference over to Mr. Daniel Gao, Company Investor Relations. Please go ahead.
Thank you. Hello, everyone, and thank you for joining us on uCloudlink's Second Quarter 2026 Earnings Call. The earnings release and our earnings presentation are now available on our investor relations website at ir.ucloudlink.com. Joining me on today's call are Mr. Zhiping 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 section 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 and 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 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 statements as a result of new information, future events, change 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 reconciliations of its 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.
Thank you, Daniel. Good morning or good evening, everyone. Total revenues for the quarter were USD 18.2 million, reflecting the continued impact of macroeconomic headwinds, geopolitical tensions affecting outbound travel from China and a significant surge in memory chip costs. Our uCloudlink 1.0 international data connectivity services remained 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 the 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 UniCord Pro, in particular, gained solid traction with revenue contribution steadily increasing as they transition out of the initial market ramp-up phase, each reaching key strategic milestones during the quarter and positioning us well for accelerated commercialization going forward. Across our new growth engines, revenues from GlocalMe IoT and SIM 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 PetPhone and PetPhone ecosystem during the quarter. I will now review the highlights for each of our key business lines. I will start with GlocalMe IoT, which saw its installed base expand further with monthly reorders now contributing meaningfully to revenue and business operating profitability on a consistent basis. In the second quarter, revenue from GlocalMe IoT grew 392.4% year-over-year. Our total installed base reached 3.34 million units and 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 PetPhone ecosystem, which has undergone a comprehensive upgrade into a dedicated pet AI agent, building on the AI-powered plus social model we pioneered in the first 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 expanding our pet AI capabilities across communication, safety and health management. On the market 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 SIM business lines 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 SIM 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 broader 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 SIM scaling consistently. Our premium MeowGo G50 Max is the world's pioneer leading 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 has been reliable across a wide range of scenarios from urban environments to in-flight travel. Powered by our AI HyperConn technology, the G50 Max has built a market-leading position in the USD 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, this same condition has created new opportunities for the G50 Max and other premium solutions, 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 World Awards in 2026 and being shortlisted for Leading Consumer MVNO/Sub-Brand, further validating our technological 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 PetPhone AI and social PetPhone, the ramp-up of MeowGo 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 divides 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 Mr. Shi.
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 (DAU) and monthly active users (MAU) represent the average number of and unique users engaging with our GlocalMe service on a daily and monthly basis, respectively. Those metrics recorded robust growth in the second quarter. Average DAUs in the second quarter were 376,376, representing an increase of 13.3% from 332,323 in the second quarter of 2025. GlocalMe IoT, GlocalMe SIM and GlocalMe Life all achieved substantial growth with average DAUs up 277.3%, 132% and 801.6%, respectively, for the same period last year. Average DAU from our GlocalMe MeowGo business declined by 7.3% year-over-year. Average MAUs were 744,966, 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 increased 210%, 53.8% and 599.7%, respectively, from the same period last year. Average MAU from our GlocalMe MeowGo 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 MATs in the second quarter were 706,382, 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 MATs from GlocalMe IoT, GlocalMe SIM and GlocalMe Life increasing 93.6%, 35.4% and 843.2%, respectively, from the same period last year. Average MAT from GlocalMe MeowGo business decreased by 5.7% year-over-year. Following the stable growth last year, PetPhone continued to gain traction with user adoption and engagement increasing further during the quarter. In the second quarter, average DAU and MAU for PetPhone were 1,519 and 1,845, respectively, while average DATs and MATs for PetPhone 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 a pool of SIM cards from 398 MNOs globally. Total revenue for the second quarter of 2026 was USD 18.2 million, representing a decrease of 5.9% from USD 19.4 million in the same period of 2025. Total revenue across different business lines were as follows: GlocalMe MeowGo business, USD 15.4 million, representing a decrease of 13.1% from USD 17.9 million in the second quarter of 2025. GlocalMe SIM business, USD 1.3 million, representing an increase of 78% from USD 0.7 million in the second quarter of 2025. GlocalMe IoT business, USD 0.8 million, representing an increase of 392.4% from USD 0.2 million in the second quarter of 2025. GlocalMe Life business, USD 0.5 million, representing a decrease of 21.1% from USD 0.6 million in the second quarter of 2025. PetPhone business, USD 0.2 million, representing an increase of 1,527.3% from USD 0.01 million in the second quarter of 2025. Revenue from services was USD 13.3 million, representing a decrease of 9.2% from USD 14.6 million in the same period of 2025. Revenue from services contributed 72.9% 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 USD 9.2 million compared to USD 10.2 million in the same period of 2025. Overall gross margins in the second quarter of 2026 were 50.2% compared to 52.8% in the same period of 2025. Gross margins on service were 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 USD 11.5 million compared to USD 10.1 million in the same period of 2025. Net loss in the second quarter of 2026 was USD 3.0 million compared to net income of USD 0.7 million in the same period of 2025. Adjusted EBITDA was negative USD 1.8 million in the second quarter of 2026 compared to positive USD 1.4 million in the same period of 2025. For the second quarter of 2026, we recorded an operating cash outflow of USD 3.0 million compared to an outflow of USD 0.9 million in the same period of 2025. For the same period, capital expenditures were USD 0.04 million compared to USD 0.2 million in the same period of 2025. Turning to balance sheet items, our cash and cash equivalents were USD 25.2 million as of June 30, 2026, compared to USD 28.0 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 total revenue to be between USD 19 million and USD 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 USD 75 million to USD 85 million compared with the range of USD 85 million to USD 100 million we previously announced. We are revising our full year guidance in light of persistent macroeconomic challenges and global trade headwinds, which have had and may continue to have a broader impact across industries. These estimates reflect 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.
Questions and answers
Your first question comes from Theodore O'Neill with Litchfield Hills Research.
I have two questions this morning. The first is about memory chips and the supply chain and semiconductors in general. You cited, which everyone has been seeing, memory chip cost increases. What are you doing to ameliorate that? And are you seeing other issues in the semiconductor supply chain as well?
Yes. There are several impacts. The supply chain for chipsets has been affected by AI volume demand in China. For memory chips, prices have increased roughly five to ten times, and this impacts our component costs and ultimately our sales prices to customers. In the earlier part of the year, we increased our memory inventory to try to offset the price increases, which affected our cash flow. We have also had to cover some increased chipset costs. In the second half of the year, in several months, we plan to increase our sale prices, though we will consider customer acceptance in timing and magnitude of those increases. We have also revised R&D to reduce memory requirements for some products to minimize the impact, adjusting hardware where feasible. Additionally, PCB and other component lead times and costs have been rising. Overall, supply chain conditions this year have been worse for our products, including MiFi devices, PetPhone and other pet care products, and we are taking steps to mitigate these impacts on cost and supply.
My other question is about the GlocalMe Life business. In the prepared remarks, GlocalMe Life business revenue decreased year-over-year, but the average daily active users increased over the same period. Were users spending less money? Could you explain why revenue is down while DAU is up?
Yes. For the second quarter figures, Life's revenues were affected by two parts. One part is hardware deliveries to our customers; the volume of hardware deliveries in the second quarter was slightly down, which accounts for the revenue decline. However, we have delivered Life products in prior quarters with stable growth volume. The MAU figures reflect a cumulative active installed base from historically sold hardware, so the cumulative MAU metric has increased dramatically compared with last year. The two metrics measure different things: revenue reflects second-quarter sales activity, while MAU reflects the cumulative installed base and usage of devices sold over time.
I have a further comment on this. For Life, the supply chain impact from the AI industry—memory chips, PCB and other components—led us earlier to ask customers to place more orders in the first quarter before price increases. As a result, first-quarter shipments were larger and second-quarter orders were a bit lower. This explains the sequential pattern. On a first-half-year basis compared to the first half of last year, volumes increased dramatically.
There are no further questions at this time. I'll now hand back to Daniel Gao for closing remarks.
Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact uCloudlink's Investor Relations through the contact information provided on our website or speak to our investor relations firm, Christensen Advisory. We look forward to speaking with you again on our next quarterly call. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.
Thank you.
Thank you.