Diamond Equity Research Releases Update Note on uCloudlink Group Inc. (NASDAQ: UCL)


NEW YORK, June 06, 2022 (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 the Group Inc.’s financial uCloudlink results, management commentary, recent developments, outlook, risks, and our revised valuation estimates.

The update note is available here. Highlights from the note include:

Improved profitability through cost optimization - uCloudlink reported its financial results for Q1 2022, with total revenues of $15.6 million, down 11.8% year over year, being the second consecutive quarterly decline since Q4 2021. The decrease was primarily due to the lockdowns of certain cities in China due to the resurgences of the Covid-19 pandemic, which had severe negative impacts on the company’s supply chain and product manufacturing, resulting in a 37.9% YoY decline in the company’s revenues from sales of products. Another reason for the slowed growth reported is that part of revenue in the first quarter came from orders placed in the fourth quarter of last year when the company’s product deliveries were heavily impacted by the rise of omicron globally, especially in main markets for its products such as the U.S., Japan, and Southeast Asia. Despite that, gross margins reached record highs since 2020, while operating expenses decreased significantly by approximately 44.7% over the year as the company took steps to streamline costs, further narrowing the net loss to $7.6 million, or $0.27 per basic and diluted ADS in Q1 2022, in line with our projections. We model UCL’s profitability to further improve, as the company continues to optimize its cost structure and control operating expenses, while bringing more 5G products to market and developing its PaaS and SaaS platform centric services and ecosystem with a large addressable market.

Supply chain and product manufacturing expected to recover in Q2 2022 – Management expects supply chain and product manufacturing to begin to recover in Q2 2022 as the Chinese cities where its main manufacturers are based reopen after the lockdowns. The company has moved part of its supply chain from Shanghai to Shenzhen, one of the earliest cities to resume work and production in China amid this wave of epidemics, which will help the product supply return to normal and boost the company’s product sales revenues. We believe that the company can potentially achieve steady growth with its success in the 5G market, as one of very few global 5G network roaming providers whose products cover almost all countries’ 5G radio frequency bands.

Valuation Outlook: We have updated our financial model to reflect the latest financials and comparable company analysis, valuing the company at $6 per share contingent on successful execution by the company.

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 305 MNOs (mobile network operator) in 56 countries and regions. 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 including Factset, Morningstar, and Thomson One.

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 06/06/2022 the issuer had paid us $70,000 for our 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 year of coverage for update notes during the term, 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 06/06/2022. 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
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