Plover Bay Technologies Limited (1523.HK) Earnings Call Transcript & Summary

So Chris, maybe you go for the second question first, and then I'll go back to the first one.

Yes. So yes, the reason for increase in current receivables mainly because we had a strong month in June. So nothing special about that.

Yes. So it's more like a timing issue. Okay. So back to the EMEA strategy. So we are seeing, for example, the transportation market. So when people are putting this on the train, when people are putting this on the bus and when people are putting into the ferry. So these products are mobile products. But then it's different from the products that we're selling in the U.S.A in the past. So now we have a product category focusing on these applications in these markets. So that's why it has become competitive. And so actually, the strategy is actually very, very simple. We just -- we just widened our product line and not to focus on USA only. So -- and of course, all these things -- it is not a change of strategy. In fact, we have been doing this for years. But it's just that we finally see it has cash over the tipping point.

Next is Steve.

Congratulations on a very strong quarter and a very difficult environment. Just to get a little clarification from you here, as I look at the product matting forward, this order seems to mark highlighting from you all of you using the word ecosystem, which you may have used in the past, but I haven't focused upon. And I get the sense if we take the combination of the mobile [indiscernible] Europe, the new product in August with with StarLink and when I think about this deeper relationship with Iridium, is -- do you feel like in the underlying trend, you -- I guess it was 2 or 3 calls ago, you spoke about some pretty aggressive 3-year targets. Does this sort of -- are you calling out here that the ecosystem is -- has expanded to the point where you expect it to accelerate on itself, you have a level of excitement that I just want to clarify and understand if -- how do you think about this in the maturation of the strategy? I'm sorry, if that's a bit complicated question, too.

Yes. No, no, no. This is good. So actually, as you know, as we mentioned some time ago, this ecosystem is all about the devices. And then this now is we are seeing a lot of devices are the mobile devices, which is the phone. And that is so running a software app over there, the precision app can be interesting. Because [indiscernible] now is -- of course, you know most of the phones today, there's only 1 active radio -- cellular radio. So that means if we have to do -- if we have to SpeedFusion over there, it is always 5G and Wi-Fi or maybe they have a USP on. But most of the time, people don't use to [indiscernible]. So let's let's treat that like a WiFi and 5G connection on together. And then so we are seeing that is for when people are starting to use this, then they will see the power of SpeedFusion. And at the same time is that they will see is -- okay. Okay. In our strategy, in [ Japan ], is we believe that this could go into a different market because a lot of Android devices are actually embedded into the POS terminal. It is embedded into the digital signage, so having an app working on all these things is bringing and breakable connectivity or the reliable connectivity to other IoT devices. And then at the same time, is -- so when people are using our routers, when people are using the speed version infrastructure, the ecosystem. Then there will be infrastructure market to, so it's all along with all these kind of things is actually is going to create a [indiscernible]. And that's why we are still optimistic about reaching the goal that we shared with you guys before. But again, I would say it's more like a long-term goal. And it's probably more like -- it's probably more like we mass. We are going to the space. So it's a target. If you ask me, are we going to reach that, we are optimistic. But if we are measuring step by step, and we're going on track on all these things, then I would say is that we are optimistically -- we are optimistic with what we are doing.

Maybe we can move on to some questions from the chat. So the number of distributors and resellers from the website is 304 at the end of June, why is number reduced to 302 at the end of July.

I think I can take these questions. For underperformance we just filed. So maybe they are to underperformance.

Okay. Sorry, we have a question from -- live question from [indiscernible].

Congratulations for your results. And I have a question about our guidance. our guidance of the growth or the profitability in the second half or for the whole year, if you have the guidance for the different regions, it will be better.

I think in general, we do not provide a specific guidance for a year, but then I think we are in confidence in around 15% to 20% growth over the long term. So -- and we have a pretty good operating leverage, and we expect this operating leverage will continue in the second half.

Yes. So maybe let me add a little bit on this. So we always have a long-term and medium-term goal, but our goal is always not a financial goal. In fact, it's at the $300 million mark. We shared with you guys before, it's more like an internal motivation for all of us. So we want to be a great company and being a great company should be profitable as well. And we also understand this, yes, money is important because these are -- the financial strength is important. So this is going to give us the resources that we need to build better stuff. But the ultimate goal is to build a great company. So I would say is we do not offer guidance for this reason. But we always want to continue to build a great company from here.

Thank you very much for your answer. I just want to follow asking about the -- do you think it will be -- I see your gross margin is very stable in the future in the past. How do you see the trend in the second half for the value change to the gross margin.

Yes. Okay. I think [indiscernible] again because our products are welcomed by our customers. And then as this margin is sanely very stable. But of course, sometimes you might see some fluctuation because if you look back in our 9 years of operating history and as a public company. So you can see that this margin is generally stable, but sometimes it may fluctuate a little bit. But again, the reason why is we never focus entirely on financial numbers. We focus on the long-term quickness. So what I would say is that now the situation is because the subscription business, the subscription business is getting more the contribution of subscription business is getting -- how do we call that? Yes. strong -- yes, yes, right, right, right, right. So yes, and because of this reason, and that is so you will see that the gross margin will be even more stable. But again, don't be [indiscernible] if there's 5 points like a variation. And the customer sometimes maybe if we see as we need to -- we need to win in [indiscernible] market. We need to see the center market. And then sometimes maybe it's because of some currency fluctuation in the region, but we still think we should own that market, and we still go aggressive with that. So that's where the margin will be fluctuated because of those reasons.

I see. And we are looking forward to seeing you become greater and greater.

Yes. And then from Brian. [indiscernible] Previously, we mentioned edge computing on routers. When will we see material impact on revenue? I learned from Ericsson's earnings call that they were also focusing on routers edge computing, particularly on the use of use case of customer AI deployments at the edge. Do you see the same?

Okay. So yes, absolutely. So first of all, we see the edge computing is definitely the trend. And what that means to us is it will mean the computing power on the router on these edge devices will be used for computing as well. And then -- so we see this as important because it now is people can use our device as the platform to deploy their edge applications. So are these edge applications are AI-related? Probably, but it is not limited to that. Because I don't -- okay, we see is when people are having a computing platform and communications platform, let's say, router in different boxes. So this is actually creating more difficulty in managing the devices, reliabilities, stability and things like that and the power sources. So putting all these things into 1 platform makes perfect sense. And then there's so in terms of this edge computing, I think it is more meaningful to us because this is going to expand the ecosystem way further because then is some system integrators, managed service providers, they can run their letter software on the devices. And then this is going to make our product more stickiness to the customer department. So I would say it's interesting. But now if we are looking into the revenue implication for that, we do not have -- we don't have a way to measure this for the time being. Because we are still experimenting and trying to learn and trying to find an area that we can be really unique. And I would say is now -- as you mentioned, the credit point they can do edge computing, everybody can then do edge computing. But then we are trying to find a way to do that in proper way that fits our market and our customers.

Next question for Brian is SpeedFusion Connect's app was launched a long ago. Is it the first step to decouple the software and hardware and perhaps something like SpeedFusion as a service would be developed such that it can be employed in different platforms or hardware.

Yes, absolutely. So we see this SpeedFusion Connect app is very interesting because I shared with everybody earlier is now we can go into the POS, we can go into the kiosk. We can go into the digital signage. And because of all these apps and these app advantages, so we can even -- Okay. There are some new interesting developments going on. I cannot share that with you, but the -- we want to see if there are any opportunities that we can make smaller form factor SpeedFusion devices because when we are able to make all these smaller form factors SpeedFusion devices, then it will open up and other group of new interesting applications. So I would say -- are we going to launch this as a special as a surface? Yes, absolutely. Yes, because as I mentioned earlier, this is going to create infrastructure market as well. So yes, that is just 1 step to go into that big yes, we can say that's a package for now.

Next question is from [indiscernible]. Have we thought of taking a page from Apple's playbook and charge a subscription plan yearly, which allows free hardware and software upgrades.

Okay. Yes, we are always open mind in looking into all these things. But the thing is if we are going to this market, we probably want to work with the MSP for this. because we always embraced a small giant approach. We cannot do too many things. We just want to stay focused in certain things that we do very well. And then -- so I would say, so we like this idea. We think of that, but we'll probably work with MSPs for this approach.

Next question from Gilbert is did the tariffs affect our market share in comparison to [indiscernible].

We will not know the -- I mean, if we look into the numbers in Ericsson let me answer this. Actually we don't care. So we don't know. Next is how is the competition in Europe? Can you comment on our competitive advantage in European margins?

I think it generally is our brand is very strong as reliable brand. So we are reliable, we are responsible. And at the same time, we are innovative. We are not the cheapest product in the market. But at the same time is that we are also not expensive. There are a lot more products way more expensive than us compared to -- especially when we look into the total cost of ownership. But that is -- so I think our customers, when they buy products is use that for professional applications, industrial applications, long-term applications. So are they were going to the lowest priced product not really. So that's why we do not see I think you're referring to [indiscernible], European partner, we do not see [indiscernible] is really a competitor because we always see that there are definitely large product, they are lower price than us. But again, I would say is if we look into the value yes, the cost benefit, and we are super competitive.

Next is how much revenue with [indiscernible] with generate every year.

I would say that the partnership with Highrock is not really about the revenue. It's really about -- this is a high-profile event. And then we are really proud of the thing that they allow us to market that because we have a lot of really cool customers. we have a lot of really cool applications. But the problem is we cannot share that. Because all those cool applications, a lot of all those 2 customers, they do not allow us to talk about that. So I would say is that the high rock spring is the first of a kind that we can publicly market that. And in fact, there is a really substantial value, which is we can bring customers to the high rock's to see how things work behind the scene. And then -- so I would say this is more like a a global showcase for us. So we really love these guys.

Next is from Henry Lu, SpeedFusion Connect. Right now, it's free, what is our monetization strategy.

Okay. So we feel like are we going to charge $10 a year? Are we going to charge $10 a year? Yes, we think of that. But I think for the time being, that is not the right strategy. For the time being is we want to make this almost like a gold standard. We want people to just keep using that. Because the great thing about the technology business is there's always new stuff. There's always an upgrade. And that eventually is when more people becoming our customers when more people are using our products, then we will always find a good way to monetize that. So I would say is the speed of adoption is actually way more than collecting $10 from these guys for now.

A follow-up question is for long-term investors, how should we visualize the company in 5 to 10 years' time? Is it going to be still networking connectivity product company? Or what is the game plan?

This is a good question. Yes, we definitely won't -- okay, we definitely see is connectivity. It's our long-term goal and then so we want to limit ourselves as a networking company. But this we would love to be a connectivity company. So because the difference is being a connectivity company is, yes, we can have our networking kids. We can have our networking hardware software. But at the same time is our mode of connectivity, so there -- we could become the booking.com of connectivity. So in other words, it's okay, imagine that. When you have the SpeedFusion Connect app and then when you're traveling around and you started to feel like I want to get a Peplink -- I want to get the eSIM locally. And then this is always you may want to use the SpeedFusion Connect app for that. So I think as all these kind of things are the real new that we're working on. So of course, the pace some certain things happen just faster and sometimes it's not because there's for all these executions for all these works, it clearly requires a lot of work and integration. And so that's why sometimes you see as we grow faster, sometimes we might seem slow in a year or so. But again, so in 5 to 10 years' time, is -- okay, we want to be here to make history. So -- that's the thing that motivates us every day.

Henry has another follow-up question. He says, I walked to pass your office in Hong Kong last month. Is [indiscernible] for the cost control. It speaks a lot about the office culture. But isn't the office to test -- do you think such 1 place may discourage talent joining the company?

Next time just don't pass by, come up and see the team because we are in a great location. Yes, we are in agroindustrial building. Yes, this is true. This is actually industrial building, but we have a lot of space inside. And there are lots of great restaurants around the area. And then -- so we have 5 minutes away from the subway. And then there's a lot of our colleagues, they just walk 10 minutes to the office, even under [indiscernible]. So actually, this is a great location. Next time, just don't pass by, come up and have a drink. Sorry, there's 1 more question. We have a global team. Not everybody who works in this heavy building, so -- and a lot of time is so for sample some of our colleagues, they work in U.K. work in their lovely house, and then they have a beautiful garden and then so these guys maybe they just come back to this type of as one in a year when they come back to Hong Kong. But that is actually we have -- we have a team in Taiwan, we have a team in Malaysia, we have a time in Lithuania. And I would say our best office is probably in one. Okay. In Malaysia, we have -- our office is in a great location. It's almost like the City Plaza in KL. So I think the most convenient location. But then so far the brand team is that they have a -- they have built offices over there. So again, I think at this stage because a lot of our team members work remotely but you are right, if we just when people look into us, they really need to spend time to live in looking to us, nobody probably love with us from day 1. Nobody following up with us on the first site. But when you now is better than people usually like us more and more.

Okay. So -- another question from Lucas many of your distributors also sell [indiscernible] products. They have recently established a new factory in Canada. How do you see the competition in hand?

I think is, okay, Yes, I'm aware of that of because on linking, you know what's going on in the world. But at the same time is, I think, is we have a bigger trim than most people. So when we look into our bakery, then I think it's good to know what other people are doing. But then I don't think spending much time in seeing what people do and scale ourselves or doing whatever else is not that meaningful. So I would say, again, is the name of the game is speed. We just need to win faster. We just need to win faster than anybody else. So we make progress faster. We hit the world faster and then we learn. And I think it's actually these are more important to us. But the same is [indiscernible], we do not believe we can run good factories. We -- our manufacturing partners, they all on world-class factories. I will rather work with those guys for world class. I would rather work with our partners who are running world-class factories to build the products.

Next is Gerard. What is the number of devices now in our user base. It was around 600,000 last year, if I'm correct. Okay. So the number of registered devices on our IC2 platform. Right now, it's around 680,000. Next is, what is the company's performance target for the next 3 to 5 years. Is it mainly provided by the growth of 5G networks?

I think it's more than the growth of the 5G networks. Yes, definitely, the growth of 5G network is 1 metric, but the other thing I would say is that the growth of LEO services, [indiscernible] satellite, lower [indiscernible] satellites. That is also a good benchmark for us.

Gerard again, could you share the growth of our revenues for Starlink this year so to have an idea of the momentum.

I think this year, the first half is the Starlink, the revenue starting was slower than last year. And we do not want to talk about the reasons here. But I think everybody watched the news and new what happened in the first half. But long term is that we believe is the starting revenue together with our products is substantial. Because I think it's the last week, right? The site has some outage. And then I think as people also knowing that is in terms of RAN connections, Internet connections the more is better. And then if there's a device that can put all these multiple connections together in 1 seamlessly, then that is our business. And I think that is a good one. But yes, definitely starting Iridium and 5G and all these kind of things, they are all [indiscernible] technologies, Internet technologies. So the more the better.

Okay. Last question. Since we always -- we usually talk about having a price pop, we are also not the cheapest in the market. So what we do consider as a [indiscernible] vote.

I would say is we really listen to the customer because a lot of times we find customers talk to us and they said, hey, "Oh, can you do this? Can you do that? Do you have a box doing this and that", and that is -- so we really listen and we really build that thing for them. So -- and actually, it's a lot of our long time friends. They started the relationship with us. It's just like that. Because we are not just doing -- we were not just building 1 product based on what they need. We keep evolving the product. We keep developing new versions. We keep enhancing that. We keep evolving that. And then so -- and by the way, so -- and it's almost impossible to do that right on the first time. So we will do that a couple of times to make it right. And right in 1 year doesn't mean right in the next couple of years. So in the next couple of years, we will modify the product and hedge the product. And so we will still listen to what they need to evolve. So I think it's actually this is probably really difficult way for people to replicate because if you are looking into the financial numbers, then there's a lot of questions about justification and then so all this and that. But yes, we don't look into things like that.

Okay. That's all the questions I see. Thank you for everyone for joining our call today. And hopefully, we'll see -- we'll speak again in about 6 months.

Thank you very much.

Yes. Thank you.