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

Good afternoon, everyone. Welcome to Plover Bay Technologies Limited Annual Results Conference Call for financial year 2022. Today's presenter will be Alex, Chairman and Founder of Plover Bay; and myself, Chris, CFO of the company. Before we start the presentation, monetary figures discussed in this call will be in U.S. dollars unless otherwise stated. Our results have been published, and you can find it on the HKEX news website. We also published our presentation slides and you can find it on our website at ploverbay.com. I will now start with the financial recap and then Alex will go through our business updates, outlook and strategies. And after that, we will start the Q&A. So let me start now and I shall share with you the summary of our financials in 2022. So in 2022, our revenue increased by 17% year-on-year to $86.8 million. Our gross profits increased by 8% year-on-year to $46.5 million. Operating expenses increased 9% year-on-year to $20.1 million, and our net profit increased 7% year-on-year to $22.7 million. During the year, our gross margin dropped 4.6 percentage points to 53.6%, while our net profit margin dropped 2.5% to 26.1%. Our diluted EPS was $0.26 per share, which increased 6% year-over-year. More on revenue, overall our revenue increased 17% to $86.8 million, of which wireless SD-WAN segment increased 10%, accounting for 54% of our total sales. Wireless SD-WAN segment increased 16%, which accounts for 17% of our total sales. Warranty and support services segment increased 34% year-on-year, which accounts for 24% of the total, and software licenses increased 32% year-on-year, making up 5% of our total revenue. As you can see, this year, our fastest-growing segments are the ones related to recurring revenue, which I will go through later.  In general, we saw encouraging growth in terms of number of devices under a subscription and the actual subscription booking amount, booking dollar amount that we received and also sales from our 5G LTE data services. Later on, I will share more on the numbers for these. On wired and wireless router sales, we see strong growth in 5G routers, small enterprise routers, and supporting products such as long-range wireless antennas. Part of the growth in these products was offset by platform migration among our LTE products because many key components used by these other products have been discontinued by our suppliers during the semiconductor shortages. So we had to develop new platforms to continue these products. So during the migration period--transition period, this has affected the sales of these product lines. Geographically, sales to North America increased 21% year-on-year, mainly driven by strong growth in recurring revenues and 5G routers. Sales to EMEA region increased 11% year-on-year, driven by strong growth in 5G routers and long-range antennas. Sales to Asia markets rose 19%. Particularly, we saw strong growth in Hong Kong, Japan, and Malaysia, offset by declines in Singapore and Thailand. In other regions, which is mostly Australia, sales decreased by 9%. And we believe this is due to general project timing and to a certain extent, the unfavorable exchange rates.  Next to recurring revenue. Our recurring revenue, which includes warranty and support services segment and some recurring subscriptions booked in software licenses segment in total increased 37% year-on-year to $23.8 million. Recurring revenue now accounts for 27% of total revenue. During the year, we have developed new features of our cloud platforms, such as InTouch, which enables IT operations to remotely manage third-party devices, such as cameras, IoT sensors behind our routers and without any specialized equipment and remote PC software. We also bundled even more software features into our subscription packages to increase their value proposition to our customers. We believe these efforts have helped drive more people to keep or renew their subscriptions. For example, we see the number of devices under a subscription at the end of 2022 has increased 33% year-on-year. Second, the dollar amount we received from customers buying subscriptions increased by 49% year-on-year. On top of that, part of our recurring revenue includes sales of LTE data. And this service was launched in 2021. Revenue from this part has been ramping up nicely and now exceeded 1% of our total revenue in 2022. Worthwhile to mention is that this 5G LTE data service is now built into all of our new hardware platforms. So we believe when the installed base of these new devices come to a certain level, it will be very positive to our data service revenue growth. Let's go on to gross margins. Our gross margin declined to 53.6% this year, down 4.6 percentage points. You can see that second wise, wired and wireless routers margins have both declined quite a bit. This is mainly because of the fact that we're keeping our prices at competitive levels despite component cost increases. We do this because, again, we would like to boost our installed base in order to accelerate future subscription growth. Next, operating expenses and net margin. During the year, our revenue increased 17% year-on-year, while OpEx increased 9% year-on-year. We continue to see operating leverage in our business. And while our reported net margin was 26%. If we exclude the impact of $1.7 million foreign exchange loss, our net margin would have been 28%, which would still be in the high range compared to previous years. So overall, even though our gross margin declined, our net margin remains relatively stable. This is what we have been saying in the past, that our lean operating structure enables us to be very competitive in the market in order to grow our installed base. Lastly, I will mention our increased profit to $30 million, and inventory days have increased to 231 from 183 days in previous year. While some people may find this alarming, we want to ensure that we can continue to capture large opportunities to help accelerate our revenue -- recurring revenue growth and our inventory numbers reflect this current strategy. I would like to hand the call over to Alex.

Thank you, Chris. So basically, I would like to recall on the matter of our business. Okay so we all know with these days is that connectivity is super important. And then so we all have a common expectations on connectivity. It should be simple, it should be always work. It should be cost effective, and it should be there whenever it's needed. However, we all know the reality is something quite different because now-- for example, in order to connect to a mobile network, you have to go to get the SIM card. You've got to get a router. And with that mobile router, in some countries, it needs to be certified by the operator. And that is also you need to activate the same in order to get this connected, and at the same time is so for certain areas, the fixed lines, they cannot be registered anywhere. And mobile is not always reliable because they may be conference issue or there may be fair usage policy issues or there maybe SIM card activation issues. So it's actually still quite complicated situation. And the same time is so when you're connected to a mobile network operator, so that you should require you to have a contract with a number of years. So that means if you have a situation, the only one you have connectivity for 2 weeks. So it is quite a complicated process.  So in the past, I think it's a lot of divestitures, they interpret our business. It's pretty much like a hybrid business. So we can understand that because we have our routers. And I want to emphasize again is, in fact, what we deliver is -- it's not just a hardware. We have created the ecosystem that comprise of this purpose designed speaker routers. So these speaker routers is not a general purpose routers. In fact, speakers is our proprietary technology. This is a proprietary patent technology to put multiple carriers, multiple networks together. So in general, so that means we can connect, for example, fiber broadband together with a 5G connection, and we put these 2 links together. So we have a big purpose design distribution routers. And at the same time, we have the connectivity software and the cloud services. The objective is to make things simple because in order to make a connection reliable, you need to have a head-end devices, and you need to have a client devices, you need to put them together. So most people do not prefer to have something like that, it's a bit complicated. So that's why we've created a bundle of cloud services in order to simplify all these things. And at the same time, so we have a team of action-driven go-to-market partners. So these are not a general resellers. So these guys are actually they are our users. They are our customers. They have used our products before. But at the same time, they apply this product, our technology into their business. So these guys, you can see they actively participate in our customer programs, serving feedbacks, including the goods and the bads about their experiences with us. So this approach is actually very efficient because we directly talk to the customers, the people who are using our products. And at the same time, most of the time is these community members, they're helping each other to solve technical problems to share application examples. And at the same time, they give us tremendous insight about what needs to be built for the market. So this is a clear condition -- and at the same time -- so we're seeing the source of connectivity. It's getting a pretty wide range these days.  So every country, we can have multiple operator, different ISPs, offerings services. And at the same time, it's usually there are a couple of our operators, mobile network operators. They all bring a very competitively basic consumer 5G plans, LTE plans and also the emerging areas, which is the 5G and LTE. And of course, the low office, for example, is just like a  OneWeb. So this is -- so that we have these multiple source on connectivity. And then so what we really create the value is supercharging this connectivity because today, most of the time is that these connections are just one single connection. So that means is somebody who already has a fiber plan might feel, okay, I have a fiber plan that's pretty enough. But with our ecosystem, with our products and services, so we are actually enabling multiple sources of connectivity by supercharging the broadband, supercharging the WiFi by adding multiple sources of connectivity together. So -- and then the benefit is actually meet because now it's people get faster broadband and then this is much more reliable. And that is -- so we are seeing this supercharging connectivity can be applied to various industries, where historical markets. And we look into the level of complexity or the level of the requirements. So you can see some applications, for example, maybe the work from home thing or the first transportation thing. People are looking primarily for wireless broadband. They just need a wireless connection because in these applications, you cannot simply connect that to a landline. And that is also for home offices, retail shops, home offices, yes, they are able to access the fiber broadband. But at the same time, these people are looking for better connectivity because they do not want the POS to be to be unable to handle the transactions or they do not want applications to be jammed because of a single connection.  So people are looking for better connectivity. And the same time is so banks or construction centers or the large events. So for them, the connectivity is an essential one because they cannot lose a second of outage in these situations. And if we're talking about the top safety market, telemedicine market, the oil testing market, this is even much more severe or like the crucible market. So this is actually very critical. This is actually as important as our sources. So in a hospital, you can afford a single second of power outage. And for the same reason, they cannot afford a single second outage for the connectivity. So this is a mission-critical connectivity. And what we do is we do -- we do supercharge all these activities, even though they have different levels of importance. So basically, that is the foundation of our business. Again, we are not selling a WiFi router. We are not selling our SD-band router. We are not just selling a router, switch and things like this. There are tons of products like this in the market. But we put all these things together, including the cloud services, such that people are experiencing a supercharging experience because now you do not need to deal with multiple operators to get all these multiple source of connections together. So recently is that we are very encouraging example. So one of the world's largest cruise port operators. So they are using Star links to improve their onboard experience for their gas and crudes, such that so they can have a really good potent speed the ocean, at the cruise port. So they are using actually the ecosystems, including our routers, antennas, outdoor WiFi and everything. And then so this is actually without a really passionate counter, we won't be able to get this done in such a source because basically, we receive a e-mail inquiry from the end customers, they are telling us their issues to test out with our technology because of the problem to solve. And then so we pass these sales leads to our patron. And then -- so that guy is already- he  just jump on the plane the next morning, going to see the customer and he's bringing along with our products to have a trial with the customer to show how it works. So the customer is super impressive with the situation. And Anders, so he's telling us, okay, so as we are going to give you to both to try it out. So let's see if this is really working as expected. So in a really short period of time, so it's just a couple of weeks and then so our partners are able to connect all these starting over with these 2 boats.  And then so we delivered tremendous results and then the customers are so happy that they have -- they have standardized the whole solution together with us. So the implication of this showcase is actually, we improved the styling in large deployments. So I guess it's in our previous calls we have investors asking us, hey, it's starting going to be an alternative technology to 5G, is going to compete with what we have is going to mix petition obviously. So this example is a perfect example that no, that is not the case. In fact, even the 6G or whatever, is that going to replace the technology? No. Because if we look into this from a different angle, people are not looking at speed only. People are looking for reliability. People are looking for a better connectivity, which they cannot be done with one single technology. So the mix and match technology works really well. But whatever the mix and match technology, if you're doing that by yourself or if the -- if you're going to do this with SD-WAN. So that is a complicated process because you need to go to connect to different operators. You need to find a product that is certified with all these operators. You need to get all these things integrated together. So that is doing the posts, people might be finger-pointing each other and all these kind of things, that is creating friction. And at the same time, as maybe the customer is only needing this kind of connectivity for 3 weeks. So maybe in situations like that, you do not want to spend 2 months' time in order to get a 3-week connection working. And at the same time, you do not want to engage with a contract like that. So that is actually the foundation of what we believe we are creating a new segment. We are creating a very interesting industry.  So in our case study is this is a branch defined in Malaysia for fast switch chain. So I think these the fast switching is they just need a better connectivity. The reason why is today, all these POS are cloud-based and then the phones are voice op. So everything in this branch are digital, together with the digital signage and everything. So they need to be reliably connected. And again, when you are deploying thousands of branches in the country. So different areas have different connectivity challenges maybe in some areas, there is a tough race issue with the landline, maybe in some areas, the broadband is just not fast enough or the upload speed is not fast enough or not reliable enough or maybe these are doing rainy days in some locations it's not reliable at all. So again, the customers are defining our supercharge connectivity solution for better connectivity. So you can tell the speed fusion thing is the technology behind, but this is no longer serving in each market. So this is no longer a niche problem because if we look into the connectivities, the connectivity is the element why people are buying router. People just want to have a bad connectivity. That's why they buy routers. That's why they improve their WiFi. So what they're looking at is not to buy the networking equipment is to get better connectivity or they want emission vertical connectivity.  So -- another example is we believe this is an interesting approach because now customers -- some customers, they might prefer a network-as-a-service business model. So as we have shared with the team for, so we have a fast company in California. So there forwarding the devices for corporations in the area. And then -- so in this situation is that we are not selling routers. We are not selling all these things. We are not selling data plans. But instead, we are offering them a network as a service business model. And this customer is super happy. They have been with us for more than 3 years. And we are seeing this -- the consumption with this network surface keep rising every year. And that is what we are seeing is there is an accelerated growth. So we are actually very -- we see this approach as a very promising thing. And again, this is also related to why we believe we should ramp up our inventory in order to satisfy all the demand. Because we all know is the supply chain product, has that been over the -- has that been over No, not really. I think the supply chain thing is still a challenging thing moving forward. But then some of the customers maybe in the past, they were-- they were quite happy to stay with what they have.  So you know it's actually a lot of time is if the network is working, if things are working, people don't want to touch it, people don't want to break it, but then so when they want to expand the network or when they want to upgrade the network. So maybe the existing supplier, they have a supply chain problem or people might telling them, yes, the supply chain has been improved. So this is a 24 weeks lead time. So in a situation like that, because the post-COVID recovery is actually faster than most people expected. So in situations like that, they might want to look around and say, "Hey, I don't want to wait for another 24 weeks. So they talk to their resellers. They talk to their suppliers, they say what do you have -- they talk to the mobile operators. I have to know what do you have? So in the situations like that, we have a couple of times that our inventory is actually playing an important role for us to win over new customers. Does that mean no so people are working at consist we can -- we have the product available immediately. I think that it's just a triggering point for us to win over some switching customers. But we actually have a couple of customers in the situations like that, they told us. Oh, in the past, we never think applying because we have invested in another technology or we have another SD-WAN task for years. So we are fine with that. We are quite happy with that. So we don't have the time to look around. But because of this shortage thing when they look into our stuff, they find, well, this is pretty amazing. The cost now is I can say 30% of cost 40% of my cost easily. And at the same time, we have more user-friendly systems for them to do. They are saying, this is actually way more simple than their original solution. And at the same time, our InTouch services, which is more management remote access and remote device management capabilities. It's helping the IT folks saving them a lot of time in managing multiple brands of products remotely. So now they do not need to send people to the site to really reconfigure something or travel shutting something. So these and on having devices. But because the yield something as dominant price, this is actually giving people remote trouble shooting capability to go to access all the devices on the MACRA in a very secure way.  So I think is that the inventory piece is important for us to take at this kind of relationship. And again, if you look into our financials, our business model is actually extremely scalable. Even though we have a couple of points, our gross margins dropped 12 points, but you can see our net margin is actually not that much impacted with that. So that's why we feel like it's, hey, actually, we can go with a more aggressive growth model by growing into these network as-a-service business model. And at the same time, just opened up our eyes because now we are more willing to do M&A. We are more willing to look into other industry other segments that might be able or that might allow us to leverage our supercharged connectivity technologies go into new areas. So in terms of the investment highlights, I will pass this to, okay, sorry, I'll cover this ecosystem slide first, and then I'll pass that to Chris. So in this summary, I think this is the most important piece. So over the years, we keep building these 4 areas. So basically most people feel like we are a hardware company because we have a great large of purpose designed routers and devices. So yes, that's the higher pieces. But these hardware leases is actually working -- we're working very closely integrated with our section proprietary technology. That is a proprietary contribute technology. So -- and the piece about the hardware, the firmware, the work hand in hand. And this is actually a pretty reliable solution. So if you do the Google search, you may find us, hey, there are other companies doing some other things. People are now seeing that they have a dual product. They have a sort have bonding this and that, but again is -- so this our solution, I would say is this is the most proven one in the industry because we have the longest history in history. And at the same time, as you guys can tell us we have the financial strength into in-building new hardware, getting all these new hardware certified by the operators, catching up with the latest 5G technology and then -- and also putting how these new firmware when we release in free or something like this. This is a relentless process because there's no end point. We have to keep developing new hardware. We have to keep developing new firmware. So there's no ending for all these things. And at the same time, we have a subscription enabled business model. But all these things are related to the convenience features. So that means we are not working like some of the competitors in the industry, which is they are having a bolster subscription. If you stop the subscription, basically, is that product that you pay for or you just pay for turns into a big paper wage because in our process, with all these convenient features, it requires a subscription. So that is people are willing to pay for the subscription in exchange for some convenience. And I think that this is a much more customer-brand approach.  And this is also much more friendly to the mobile operators because a lot of our go-to-market partners, they are also operators. So they are also manage the service provider. In the situation side that we see, we are not competing with them. We are actually working more -- our business model is actually working more compatible to the business model. So -- and I would say in the past is why usually is these operators, they're the first panel when they pick they pick somebody else and not cabling. It's just because of our industry competitors, they are very willing to spend a big sales team to knock on the door and keep working on the education thing. Yes, they did an education thing and then so people work with them. But after some years, especially now is when people are starting to require an upgrade path. So a lot of time is that they find some of the products -- some of the end users. They do not want to upgrade hardware because they just want to keep using the same product. They have no problem in paying the subscriptions. But because our competitor is telling them and say, "Oh, I'm sorry, because you've got to upgrade to the latest device, platform in order to do this, and we do not have plans to support these previous models. And this has created a big problem to the mobile network operators because now they are facing a situation that either they absorb the cost for that or the end users to shop the cost for that. So that is this model is actually -- again, this is not coming from the end customer perspective. So that's why we're announcing is we have a lot of Tier 1 operators they're assigned to work with us. And they're assigned to work with us not simply looking us as a lower cost alternative. No, they're not looking at us from that perspective. But they're looking at our business model is actually a more sustainable model and more compatible to their business model. So -- and in the situation that our approach of working with a team of action-driven go-to-market partners is really helping us to do this because again, as you can tell, as our SG&A, yes, it doesn't increase a lot, even though our business can keep on scaling. What I will say is we're just touching the surface because we have a long tail market reach. As you can tell with modes or applications, vertical like us, actually, this is high. I would say that this percentage is just the beginning. And then I believe this ecosystem. We are -- okay, again, we do not have a crystal ball 5 years ago, 6 years ago, we keep learning. We keep experimenting. But that is now we are pretty comfortable and very confident that we have final the better year for sustainable growth. So Chris.

So I think that's a lot of investment highlights here. So let's open the line for Q&A. So if you have a question please use the zoom button to raise hands, and we'll have someone to unmute your mic.

This is Stephen, Can you hear me? So I got a couple of questions, so I will ask them one by one. The first one is actually on the update on the competitive landscape. May I know like whether there's any significant change in the competitive landscape in the past 6 months. Especially, I also wanted to ask on the gross margin part because I know that I mean you already talked about that we are adopting a very bigger strategy acting more aggressively compared to what we did before. But I'm just wondering like whether this is an act that was passed or we actually actively do that because when we see the gross margin decreasing, we also want to know that like because is it because the markets get much more competitive, that we are being forced to adopt tour strategy? Or we actually want to take the initiative to do that. This is really what we want to do. Thank you.

Okay. So number one question is -- this one is actually you do not want to pull along the sales cycle. A lot of time is that this is not because of the competitive landscape. This is just because customers are telling us, hey, the currency is actually making us difficult. And then it's always even though it's -- yes, we do charge them on local currency. But a lot of times, yes. So there are many reasons that people are looking for better pricing because of the post-COVID. So a lot of time is our approach is because this is not a onetime deal -- so let's don't bother with that. We tell our channel panelists, okay, whenever you have a deal just right to close as soon as possible. Just trying to make the customer happy with what we are offering. Just trying to make the customer feel like we are easy to work with. We are not -- we don't worry about the margin. We don't bought about anything like this because what we are interested to do is to grow the market. Again, we see -- we believe we are confident that we have the recipe for growth. So in a situation like that, just don't waste your time, just close the deal and focus with the next customer. So in other words, yes, we proactively do this. This is not because of the competitive situation. There is no tech at all.

Okay. So my next question is also on -- yes, so I know that, I mean, just now, you mentioned that actually, customers, I think, prefer to use the same product for a longer period of time. They don't want to like keep paying a lot of subscriptions or being forced to pay subscription in all the user views. So on one hand, I think when we look at some customers' feedback, they prefer to stick with the same provider and if the provider is not getting. I mean doing their job actually. They don't usually switch to other like players easily. So I just want to know that, like, for example, just a rough picture. So when for all the new customers that we onboard, are they coming from other competitors? Or are we actually -- most of them are from what you mentioned, like from those new customers set when we grow the market and they are new users for this product.

Okay. I think the good thing is in our industry. Actually, from time to time, all this technological change makes people feel like it's time to upgrade. So for example, all the operators, they have a very big motivation in pushing to 5G. And then for the customers that they also have a big mutation to move to 5G too because the data plan is cheaper. The cost is way lower than the LTE. And then always, I would say is every couple of years, people see that there is a need to upgrade. And then so that means we are not really focusing on to about 5% of the competitor or anything No, that's not the situation. because yes, this is still growing market. The connectivity market is still growing very fast and applications are growing. So even for the same customers, maybe historically, they're using a competitor's product, but made for a new product or a new deployment. Now they are deploying in the boat, not they're deploying in a new group of branches. So they will do the math again. So when they do the math again they probably will see is, okay, maybe this one is not that critical. Maybe I can try with a new vendor. Maybe I can try with something else to experiment, to see how that works. So that is actually creating a new opportunity for us. So again, I think it's is a growing market. So our competitors, they are doing very well too. They are busy with they are busy with their approach and they are busy with their customer base, and especially now our competitors has fallen into a bag on core. So yes, they're busy, and we are busy. But we actually don't do step on each other that often.

Okay. And I have 2 more questions, and I will leave the floor to the others. So the next one is also on the outlook. I mean, on one hand, everyone know that business can keep expanding. And like everyone they are new customers, they want to upgrade their products, their services. On the other hand, we also see that like the macro environment is very uncertain. I mean U.S. both markets are actually under like a long channel in the coming year. So what are we expecting in the next 1 to 2 years? Are we expecting more further decreasing on margin, some challenges in growth? Or we actually expect that we can continue to deliver a certain amount of growth in the coming 1, 2 years.

Okay. You know what is. Actually, again, this is a great industry. So like last year, you guys keep asking about Starlink is that going to be a competing technology or things like that. But in fact, actually, we have a launch of opportunities created by Starlink because with the Starlink with the nature of the law of everything. So every couple of minutes, every couple-- actually, there is there lots of tiny little outages on Starlink. So that is actually -- it is creating a new opportunity for us. And that is, we believe is, hey, we should make this as a supercharged the connectivity. This is actually a more easy pitch to tell what we really do. You guys -- I think we have a lot of long time investors here. And again, we appreciate you guys a lot. But at the same time, you said you know in the past -- it was quite difficult to understand what we do. It was very difficult to understand our value. But now it actually -- I think with this new approach with this supercharged connectivity bank, it is easy to digest. It is easy to understand. So that's why we believe so in terms of the mobility, the RV market, the work from home market, so the starting market, the IoT market, the autonomous driving. So basically, it's yes, also the teleoperation, and then so everything these days is it needs to be connected. And there are just multiple ways to connect it together. And at the same time, you also see even our wide online product, there is a growth there. And actually, it surprised us. I think it's about like a year ago or in our previous call. So we -- you guys asked us questions about why the product is growing. So a thing is that in the nutshell connectivity is a growing market and then applications will keep growing. So that's why we are not too much worried about the growth. But at the same time, as do we care about the gross margin, we can about other things, we are still too small. We are just at the beginning. That's why we feel like it's more important to bring people into this ecosystem. So I would say is if needed, we are willing to drop the gross margin -- but again, as you can tell, it doesn't impact the bottom line that much. But again, if that is going to impact the bottom line. We still believe this is the right thing to do because I'm sure you guys understand this actually operate our team, including myself and that is so everybody is a shareholder. So -- and then we are looking for sustainable growth. We are long term looking at the long-term thing. So we are willing to sacrifice the short-term gross or net profit in order to do something right because we have it, we feel like this is a new industry. And that is this is a one lifetime thing is that you have a chance to bring a new industry.

Yes, yes. I mean we have been sharing this for a long time. And actually, I think also I didn't mention that I think in like a few months ago, you guys run some method, which I guess get a lot of attention from the industry about right? Like is it related to the Starlink, yes. So -- and my final question is on the capital allocation. So I mean, first, we are very happy to see like you guys can keep paying high dividends as well as like growth. I think this is amazing. I just wonder like -- so you once mentioned that you might consider some M&A, I mean like maybe last year or so. So I just wondered like what's the plan right now? Are you still looking for some M&A opportunities? And if so, like what kind of things are you looking into? And like what kind of size as well?

Okay. Greg. Yes, this is a great question. So first of all, we -- again, we are here looking at the sustainable thing or again, is anything that can help us to achieve the goal of creating a new industry. So we are excited about that. So I think it's the network as a service model is very interesting. And if that's the case, you can say -- can imagine, when we are looking at the acquisition target, we don't necessarily want to buy another router company, Wi-Fi company, networking equipment company. No, we are not interested in that. But we are seeing that as hey, any other industry that would require connectivity, it's interesting. Because if we are doing that, then we have a customer base going to deploy our connectivity product. So we are looking at that level of synergy. And at the same time, are we looking at -- this is not right, so there's no mechanism here. So we're going to do a really substantial acquisition, which is having a similar market size like ours, No, that's not the case to -- because I think all this value creation is actually coming from software. It's actually coming from automation. It's really coming from anything that you can make the customers' life easier. Anything that makes the customers life easier customers are willing to pay for a subscription. So we -- our thought process is along that path. And at the same time -- so this may be geographically helping us to end into a new market or anything like that. So yes, we are looking into that. So -- but at the same time, you guys might -- my answer the question is, hey, all the money has been turned into dividend and then going to the investors' pockets. So as you don't have much cash in doing this thing. So I think that there are 2 ways to look into this. Number one thing is actually, we generate cash pretty good. I think we have a pretty good capability to generate cash over all the years. We have track record on that. That's for sure. And at the same time, if the need to grow the company and that is -- we may need to sacrifice the dividend. So at that time, we may need to strike the balance because I think some of the investors when they invest or not maybe that we may be different is the reason. Maybe most of the investors just as the long-term support supporters. -- yes, dividend is a good thing. But actually, if that is needed to sacrifice you guys are fine with that. I think is we don't have an answer for that yet. But I think we will try to strike a balance in order to appreciate our long-term supporters. But at the same time, as we also believe with our capability to generate good cash I think we might not have a big problem if we need to raise loan or something like that, too. So that's why we are not too concerned about do we have the resources to do the M&A and things like that. But I think the compatibility thing, the cultural compatibility thing and that kind of things, the mindset that is even more important. As you guys know, it's actually changing mindset is almost my mission impossible.

Yes, I agree. And I think, I mean, you are the largest shareholder with 75% stake. So I trust our decision, but thank you very much.

Stephen, I want to share with you that I'm no longer 75% shareholder. But this is still the baby, yes. Again, I think this is not just myself. I think as all of us we all build like is excited to build something out of nothing. And now it is even more exciting because there is a good chance that we can create a new leadership.

This is Gerard here. Can I ask a question? Just have a follow-up question on the future growth. Given this new strategy of more aggressive growth, what should we expect in terms of organic growth in the coming years?

The thing is 20% is on the conservative side, 30%. Okay.

And what does that require in terms of organizations on lot side? I mean in terms of distribution network, you need to access more partners.

No. I think it's -- as I mentioned, this is a conservative side and then we just keep doing our job and then we just keep our passion. And then so sit and relax, and I believe we can reach that number.

Okay, but also in terms of head count for the company, will we need to hire more people to sustain this growth?

No, no, not really... Not really. We actually -- we had too many people, if we don't need to hire any more people we want to give us more responsibility because we believe it's having a small capable team and dynamic team is allowing us to react or experiment way better. So no, we don't need much of that. Okay, okay, I need to clarify this a bit. Don't forget that this we have a really good community. This community will actually grow along with our partners. So you might see we don't need to add a lot of headcount, but actually, the community is growing bigger and bigger. In fact, recently, it's one of our webinar. That is very encouraging to us because we have more than 1,000 people joining the webinar. That is actually pretty encouraging to us. We've never seen that kind of thing before. So I would say we do not need to have a lot of people being happening employee, but we are still going to having community. I would say the commodity is more important.

Okay. So in order to sustain this 20% growth, do you think that the existing organization would be now -- there is no major disruptions or big changes.

We don't need to do anything in order to reach this...

And just a last one from me. You mentioned M&A. So are there any specific capabilities that you are missing currently to meet the needs of your customers? Any specific...

No, no, no... I don't think we are missing any capability, but we are looking at acquiring more customers. So that's why we are looking at that related to the network as a service model. So the network as a service model, meaning that is that company is just an example, maybe that company is doing is managing a couple of thousands of restaurants. If they are managing a couple of thousands of digital signage or something like that, which requires connectivity. Yes, we are interested in that kind of business because it's a band is our connectivity story and complement to that. So we are looking more like customer acquisitions from that perspective. But again, this is just a beginning, we are learning, and we're working with some of the investment bankers, trying to locate companies we are working with industry folks trying to learn more about who might be the target. But yes, so the thing is this is not a speed dating thing. It takes time and it takes a bit of luck.

Okay. Do you think that there could be a kind of vertical integration to have a distributor within the group? Is that the idea?

No, no, no, no. Again, we're not looking at acquiring a distributor. We are not looking at acquiring a networking company, a digital techno block, not anything like that. We are looking at any parties that might need connectivity -- we are looking for partnership, M&A or even faster branding opportunities. So we are we're just looking at anything that requires connectivity.

I have some questions. So the first question is related to the securities. So we know--I learned that our products has set for worse. But I also see that some of the competitors, especially the SDI competitors, interproducts they have already upgraded to the NGF company. So do you think this kind of -- so I don't quite understand why it seems that the security is not quite.

Okay. Look, I understand where you're coming from. So let me summarize your question. So basically, you are asking us is what might you -- okay, what is the -- okay, how are we doing with -- now we're dealing with security. So it's our competitors. So as a veneer, they have been improving a lot on the security or amortizing a lot of security. But why is not doing anything like that? You're asking this question, right? So I think it's actually -- yes, this is a very good question. So number one thing is, yes, if we look into the Ghana report, Ghana is saying the same thing. Ghana is saying missing all these security features. So I think it means we look into this. The thought process is like this. So there are more than 20 DRAM layers. Everybody is chasing the same thing. Everybody is doing the same thing. -- should we play the catch-up game, -- should we just go to deliver the security feature and become a me-view and check and meet the check box. So I think we decided hey, actually, we are seeing a big market in SD-WAN. We are a little longer an SD-WAN company, but it's just we do have some SD-WAN features. So how are SD-WAN features, it might just meet the requirement of most people or more -- or some people, but this might not meet the requirement of the Fortune 500 folks -- but are we going to give up that area? No, because even when we have that security feature, we are going to compete with another banding guys. So that is the top pay. That is a top fight. So we don't want that. Instead, we focus on our resources, the development effort to focus on connectivity. So in other words, now SD-WAN a customer who has been using their favorite SD-WAN, they can still deploy the Peplink or the Plover Bay solution with the existing SD-WAN -- because picking an SD-WAN is almost like religious. So if you have already using one brand SD-WAN, you do not want to touch another one or you don't want to change anything like that, even though you might not happy with them. But why you mind you do not want to change all these things because it's changing all these things, this is an ongoing patent this is no joke. It requires a lot of time and effort in order to make all the switches -- so -- but people want to connect that, they can use the Peplink product to connect to multiple 5G, they can connect to Sony, they can connect it one web, they can connect to different 5G broadband operators. So that's why we feel like we can still address the market of these Fortune 500, but we are not going to address that with SD-WAN. We are focusing on the connectivity. And that is also our bold-to-market channel panelist, they can work with any SD-WAN players. And so that's why I don't think we are competing with for SD-WAN because we are seeing a different game here. So we are not seeing SD-WAN, we are seeing connectivity.

Okay. I understand what you mean. But still, if this they included your figures into products than what we do so they can tell their customers that they also have the features that you have the what...

Yes. Okay. I know where you're coming from. So if people are just looking at the check box, the competitor can deliver the feature and have a check box you know just like in order to do things really good, there is a lot of advocacy. So there is a lot of attention, there are a lot of convenience features. For example, yes, 5G, people mainly risking routers, they're telling people that they have a 5G modem inside. They can connect the pace, but they have the global certification or they only have certifications in certain countries, but they have a goal certifications. -- probably not. And at the same time is when you deploy a product like that, how do you switch the SIM because maybe you want to connect to the volume operators, you want to shift the SIM card, but you do not want to bind all of the window and spent the outdoor unit and the SIM card or changing things like that because I think when we are really focusing on something, when you really focus on something, you see things that other people don't see. And that's why you are more leading, you're more visionary, because you stay focused, so that is exactly the situation here. So if people are just looking for a check box, yes, they made the check box, but they are still missing a lot of details. So I'm not concerned or very good about that because, as I said, we are seeing this is the opportunity of a new industry, which is a supercharger connectivity, which is offering connectivity right out of the box. And I don't think at the SD-WAN guys, they're looking into this yet. But again, even when they need to do something like this, this is not an offline thing and then there's a lot of integration, there's a lot of development. And again, we are not the best yet. We have a lot of room for us to improve, too, and then we keep moving. And that's why some of you -- you may be using our product to and you will see, hey, why -- and we are improving a lot on we are in to launch on the mobile app because we believe that the future of UI is coming from the mobile app. And then this is always our mobile app. So we have a version 1 versus 110 or whatever. And we are still not -- we're still not satisfied with that. We believe we are just -- we're learning too. So again, every company has resources issue. And -- we need to put the focus on what we truly believe what we can create tremendous value. So that's why we don't think we should catch up the other security features with other guys or at the same time, we are not afraid of our other guys catching up what we are doing because all these things -- it's not like you hire not 1,000 programmers 12 programs, you can do this. No, that's not the case. Actually, there's a lot of interaction between the end customers and ourselves. And that is with all this interaction, you want to pay really actually good customers. And when we are talking about good customers, that doesn't mean that they're paying us a lot of money. Most of the times, we see that these guys were status, so we are doing something still. They told us this is not right. I think these are the good customers because they really care about what the good products should be and these are the good customers. And we are very lucky that is that we have a good community of customers.

Okay. Okay. I see. I see. I understand what you say. Also, I have another question about the customer service. So that your -- you have.

Sorry, okay, let me try to guess what you -- yes. Okay. So actually, customer services. We all know about that. Okay. Why this is a situation? Because actually, this is more like the traditional airline and the discounted airline approach. So I guess we -- I still remember my first time traveling on a discounted airline in U.S.A. that was a shocking experience. Yes -- there is no more... And things like that. And then people -- I was asking is, wow, what's this? This is pretty crazy. I do not have a seat number and things like that. And then as I saw is that the guy who came on the flight, he told me that, hey, come on, come down. This is a pass... So now I think people are so used to the traditional approach. They might see a pain, you guys have tariffs, there's no online and this and that. So first of all, we are bridging that gap. So that's why you can see our Prime Care Plus. Now we are offering 24/7 phone calls answered by human beings. Yes, we are starting to improve situations like that, trying not to scare away before coming from the traditional airline to this low-cost carrier approach. But at the same time, I think this is more like an expectation issue. So of course, we need to improve our format. We need to improve our ticketing system better. We need to improve our response times better. So we are learning. But at the same time, we also feel like is -- that's why we need to work with the operators. We need to work with the MSP. We need to work with the MNOs because a launch of time is our content very good customer service. So we want to be the technology we want what these guys. And a lot of times when we talk to these operators, we told them, hey, do you just treat us, you just treat us, okay, don't treat us like another network vendor. Treat us like your product house. And then is customer service and all that kind of things is we have to rely and tally you guys. We'll work with you on that. And then so we will -- but at the same time, we create something that is not available elsewhere. So I think that these customers are in a similar to the security features you just mentioned... Yes... If we are comparing to traditional airline approach... Yes. We're doing a terrible to that. That is true. But at the same time, I think this is more like an expectation issue. And again, if there is an MSP in France, then there's no problem at all. So I hope this is the question you want to bring up, is that right?

Thanks for the great financial results and it's up on the many very exciting like recurring revenue, the era -- and there's pretty as far. So a question on the first line, right? I was saying it looks like it's -- and -- okay. So -- and I just wonder--looks like [indiscernible]

Okay. I think is our #1 thing is, yes, so when we work with the Starlink thing, this is Starlink Cooperation working with us. This is the Starlink customers, you're working with us. So you can tell -- you can see that the Starlink customers is including the recreation vehicle owners. This is including the Maritime customers using Starlink, or the operators that is reselling Starlink. So we are working with people who use Starlink, but this is not a Starlink corporate -- we are not working with Starlink Cooperation. So I think it's we leading boost line, one of leading good-line company. Yes, the one know about us, but that is not driven by that. This is driven by the end user. So I think when people are using our product for that. This is not because of the price. This is mostly from Google Search. We have a good reputation in doing this unbreakable connectivity or the own thing. So actually, most of -- a lot of times all these exciting opportunities. People finance is just from Google Search. So I would say is, yes, on the surface, there are other companies who can do similar things, who can still fulfill the checkbook approach, yes, they can take the check box. But again, in terms of deal terms of the level of details, I think we are probably the best in the industry. And of course, yes, it's mainly based because we -- the business -- this is like 16, 17 years at and we truly believe we are the best.

But in terms of the service or the features or?

Sorry, can you repeat the question?

[indiscernible] in terms of the features.

Okay. I think it actually is not really features. Again, most people don't get this. Most people feel like this is the feature, but anything is the whole -- the overall experience and reliability. It's very similar to when you buy a car, you -- yes, sometimes the features are exciting, when you buy a new car, but a lot of times, you just want the car to be able to -- in a snowy weather you want a car to be able to rise smoothly in remedy you expect the car to rise smoothly and safely. So I think as people appreciate our product and what we do really well is when we do the multi-WAN thing, when we do the prefusion thing, this is an all situation in most situations is we just do it very well. So this is almost like -- if I use an automotive industry, as an example, this is a all-terrain vehicle. And then our technology is all- terrain technology that can combine multiple links together. And then I think this is actually the fundamental reason why people love to use our product because they are not buying a product to troubleshoot. They're not buying a product to call customer service.

Sorry, I also want to add that customer feedback in the past, they tell us that our whole system is just really easy to manage, and it's really easy to pick up. So yes, we designed, for example, the in control to the -- it's designed to be very simple for people to learn and use. And this is one of the things that we hear a lot from our customers.

Okay. So basically, to give view and some possible reliable in terms of activity, right?

Yes, exactly. I think its reliability is a big thing.

Okay. I have one more question about your new initiative to the primary funder the corporations [indiscernible] you're just starting and testing the water.

Right. Okay. We believe -- at this moment, we believe that this thing is exciting because according to, okay, according to market research, even though most of the time we do not believe the market research. But we own -- but from a practical standpoint, we also believe the 5G is basically kind of like an extension of Wi-Fi because managing an outdoor WiFi is actually not an easy task. And a lot of time is the problem with the WiFi is related to the roaming. Yes, because the roaming of the devices like phone or like IoT devices or like robotics and things like this, the Wi-Fi roaming is always kind of like tricky and even though there is an industry standard, but actually, that's always to do it well. And then the 5G seems to be able to solve that problem. So -- and that's why -- yes, at this moment, we see this is actually a logical move for us to expand into that. And again, you start going to take off really soon. We don't know, but we believe what we are doing, this is an adjacent technology and then this is going to make the whole supercharge connectivity more interesting. So we are looking into this. So I think now this might be a bit early to say are we going to be -- is this team going to be substantial in 5 years' time or what? No, we don't know. But again, in all technology business, we should not look into any new technology like that because there are a lot of hype, there are lots of coming go in the technology thing. But the good thing again is the good thing about is our approach is -- we have a small team. So when we have a small team as we work with the ecosystem partners and this ecosystem handlers, including the contract [indiscernible]. And these [indiscernible], they actually have a lot of exposures in the technology and then previous operators, customers and things like that. So I would say is a launch of new technology with experiment and then we try to find out the tipping point. And once we hit the tipping point, usually, that thing will grow really fast. But that is so how soon can we find tipping point? We don't know. But I think it's -- again, from our previous experiences is you just keep working on this. And then one day you're finding is, hey, yes, it works. But you need to trends, you need to change that change that in order to make it work. Okay. Okay.

Alex, its Andy. I have 2 quick ones before my battery runs out. The first one is you mentioned about 20% growth. My questions are quite similar to Victor. So if you can elaborate a little bit more on the 20% growth. And also what are the biggest obstacles you see in achieving that 20% growth? So that's my first question. I'll just in case -- it's about M&A. Now can you elaborate a little bit more on your M&A philosophy? Because that I think investors are concerned or pay more attention to that because this may be your very first M&A. And until you have an M&A process that is proven, I think investors will be scrutinizing the M&A. And I'm just wondering what's your philosophy there? And how do you make sure that it doesn't distract management? How do you make sure the new target, have the incentives and all that, how do you envisage that M&A going to work?

Good. So let me answer the M&A question first. So actually, honestly speaking, this is a mindset change here. In the past, you guys have seen so we keep looking at the organic thing and then they say, yes, it's a mindset change. But do we have okay, because -- okay, what we believe one thing is the launch of behavior is -- the #1 thing is that you need to have a mindset change in order to have the behavior working properly. So now we have a mindset change then -- because in the past, we haven't shut our years to not anything related to this. But now we are more open-minded -- because we want -- as we mentioned earlier, we want to see -- we want to look into what other industries that demands reliable connectivity. Because if we can have a partnership with that person, we do want to have M&A. And then it can be done with a partnership, if that can be done with crossover branding and things like that or if that can be done with a reselling opportunity, we don't want to do the M&A thing too because dealing with people is difficult. We don't enjoy doing what people that much. So I think it's -- with that kind of mindset is we just basically telling ourselves, we should be more open mind to look into this. And at the same time, we also believe maybe if that is because a launch of a lot of these operations. they may have only like a couple of people. They might have only like a small team of things like that. So that might not be that risky because as you guys know, we have a development team in Lithuania. So actually, yes, it was back in 2019 to a certain extent, you can say you can treat that pretty much like M&A, except there's no financial transaction. But building a timeframe, building a team in Taiwan. So all these things require integration. So there is no difference from acquiring a small company. So I think from that perspective, we are not building a new building a new team in relationship. We think new team here and there. Philippines, Yes, I think that this is not new to us. So I think on that part, it's not that much of a problem of integrating of building a team. And then it's on the financial side, as I mentioned, so we are not doing this because we have private equity backing us and forced us to do so. No, we don't have that kind of pressure. It's just as we just feel like we should be more mind to do this. And are we in a rush to do all these things, -- not at all. Again, this is just a mindset change to tell ourselves to be more open-minded. And again, you know we have been extremely practical in growing the business. If we need to drop the price to close the deal faster, we just do it. If we need to stop the inventory in order to catch up with the growth or to cut the supply chain problem, we just go ahead because this is a bus company. And then -- and again, we are not looking at any short-term thing to boost up the stock price or anything like that. We don't need anything like that. So that's why I think the M&A in the concern and that kind of things don't worry too much because as I shared with everybody is, you can tell I have a little bit -- have a little bit of -- okay, what's the way word to describe this. Okay. So my shareholding coming from 75 to 68.5% is already something that I believe... This needs to be done. But because, okay, because we've a great team. So this is something that we need to -- we need to do this. So if we are going to do another acquisition that will bring that into 65, 62 or something like that Yes, if that's a good team, if that is something that work the risk, yes, we will do that. But I mean, we don't do acquisitions for the second acquisition. Yes, because yes, I guess you probably understand, I mean, if not just let me know. Okay. So the 20% growth question. So the 20% growth question is actually is a pretty organic thing. So again, if we look into the 5G market, if we look into the connectivity market, if you look into the Starlink Maritime market and all these kind of things. So 20% is actually is pretty much like an fan. So that's why we feel like it's -- this is actually -- this is not a stretch goal. This is actually I think this is actually a pretty -- pretty much generic thing to do this. we are referring to the revenue growth... Yes, not the volume growth.

We have some questions coming from Pat. So I think she's asking you provide some color on the warranty expansion business? Right. So -- in 2022, we did quite a few things to try to boost our -- the development proposition of our packages or the subscription packages, right? So one thing we did was we developed this feature called InTouch, which we have already got through. And then second is we bundled for some features into those subscription packages. Another thing that we did after the year-end was that we launched Sonicare Prime Care Plus, which Alex has already said that provides 24/7 support for our customers. So it's -- in terms of pricing, the Prime Care Plus is slightly more expensive around 5% to 10% more expensive than the regular brand packages. So then if you go up to 3 years, then it's actually cheaper. So the philosophy is that we really want to drive this warranty expansion business, right? So as I said, in 2022, the volume, the actual dollar amount that we received from customers buying at subscription packages has increased 49%. And I think that's a pretty good growth, and we wish to keep that kind of momentum. So yes -- and epicure I think you asked how are our peers responding to our invested promotions. And in the medium term, our ideal target inventory turnover day to support our target growth rates.

So Chris, maybe you answer the numbers question first, then I'll port to the question about the impressive promotion pricing thing.

So I think we do not really set a target for our inventory trend over days. But then we think that it's important to control our inventory growth. Having said that, we also need to ensure that we have enough products to meet our customer needs, right? So I think in the coming couple of years, we do try to decrease the inventory days a little bit, but we do not have a certain target that we want to get under.

Okay. Speaking about the competitors, the peers this portals response. So I would say is they don't care because just like traditional airlines, they don't care about what the discount airline is trying to do. So I think if we look into the net products, if we look into what they're doing with the new products, I feel like it's -- I imagine this is -- this is my pure imagination. The engineers probably we our engineers a lot because we are seeing there's a lot of interesting things they're doing is actually -- or finally is showing on their products, but that is on the hardware level. And then I think our proton data together with this is the suture connectivity approach and all these kind of things, I do not believe that the other people are able to replicate are able to react. So there are a couple of reasons why #1 thing is nobody is believing this. And the #2 thing is maybe the people who are seeing thinking seeing that no, this is very simple. I just work with MVNO or just put the same cadence and that's it. But then is actually it is not like that. So all these things in order to work basically, it requires a lot of software integration. And then it requires a launch of integration together for hardware, firmware and the cloud and the app. So -- and again, even on this piece, we are not forget. So I think as people either ignoring us or seeing is... This is a niche market in I guess this is not a better for us because many people are still seeing this is a niche thing. But that's where I think is even though if this is a niche, but we're doing pretty well with this long tail. So and again, it's actually honestly speaking is that we don't put much attention on our peers because we just believe we just need to run faster. So our competitor is probably ourselves. We just need to keep improve ourselves and keep running faster if we run faster than the peers. Then we don't care. We don't care what the fan.

Okay. We have a question from Paul Reese. And the question is the U.S. is your largest market. How do you raise the impact of new U.S. regulations, trying to ban Chinese pay telecom products, especially 5G from the U.S. market and how will U.S. customers react themselves over time?

I think politics is something that we never know. And that is -- but what we are seeing right now is, okay, #1 thing is technology business is kind of like global business. And then there's a lot of our team members. I think it's now I'm sitting in a room of 5 people, and then is in this front, there are 2 Canadians here. There's one American, there's one Canadian... Yes. And then as we have a mix of different culture. We have a mix of our different citizens working together. So honestly, I don't think there is much issue on this because if we are the best in this area. So I don't see why people are not using ours. And at the same time, we are not into the really serious and detecting. Again, I think our weather proposition is just making something reliable, something convenient. And that is -- so yes, you mentioned that this is a low-cost airline, which is safe, which is convenient and which is reliable. Yes, this is our the proposition. So -- and we are not into the really detecting and we are not into the really deep semiconductor thing. So yes, to a certain extent, we are just a modem. We are just a very reliable model, very convenient to use and affordable and align. So I don't think this is pretty much a problem. And by the way, at the same time, actually, we are opening a new and center in Toronto this year. So why? Because yes, we have some team members Canadians, they want to move back. So yes, we think it's a hold okay. So we take this opportunity to do that. And by the way, our CEO is actually based in Toronto. So I hope please answer your question, Paul...

Next question due to declined gross margin and bond products. EPS only grew 6%. How do you see EPS growing over time an in line with revenue growth and is a how. So I think, first of all, mainly our gross margin has declined this year. I think coming -- in 2023, we have less pressure on semiconductor product pricing. Back in 2020, I think late 2021 and early 2022, that was kind of the peak of semiconductor component shortages. And at that time, suppliers, they won't -- even they weren't willing to even give us a lead time on when they can deliver our orders, right? So -- but then the situation has kind of improved over the past months. And I would say the short situation has gone a lot better. So I think once we digest the products that we currently have. And then it will be -- the cost pressures will start to go down. And so I think in 2023, the picture on gross margin will be less severe than what we faced in 2022.

And by the way, I want to share some of our process with you guys, too. So actually, we are not driven by this EPS at the semiannual report and things like this. So what we are looking into is the opportunity to create a new market, a new industry. So we are saying that is whatever makes sense. We're just doing this -- that's why it's actually -- we don't really care about the CPS honestly.

Okay. So next is, can you talk more about your moat? -- for example, is to stop competitors replicating the features of touch...

I think that this is going back to the run fast approach. I mean, there's nothing we can stop our competitors replicating this and that. And actually sometimes it's actually quite satisfying and seeing competitors chasing us. Yes, it dissatisfying. Yes, because that is endorsing we are the market leader. And then this is always every market leader we have followers, people will just copy we will just try to replicate the same thing. But again is they're just playing catch up. And then again, don't forget when we work with our community members, so we develop -- we see new opportunities. We work on new stuff. And then we just make it more reliably and then we're just making more convenient. So just the checkboxes we don't worry about that. And again, we just keep running fast to reach our -- hopefully to reach our goal, but we don't turn our heads that often to see what are you guys doing. But what we are seeing is people chasing us at, it's pretty satisfying.

I think there's a few things that are currently unique in our ecosystem. For example, a lot of our devices, routers are now -- they currently have built in 5G LTE. And I think none of our competitors have this campaign.

Yes, again when people just keep trying to copy and following this and that, so there is a lack of coherence and lack of coherence is actually making all these ranges are not useful or not convenient at all. So again, when we put all these issues together, the coherence thing is actually -- is a deal. So it's not just the features. It's the overall experiences the reliability.

So next question comes from [ Bram Road. ]

Thank you for the excellent presentation and taking some of my questions. I would like to go back to the inventory. And I was wondering if you can, first of all, give us some breakdown as to the composition of the inventory. Can you talk about like what is raw materials, what is the work in progress on our finished goods? Just so we can have a sense of what, for example, like semiconductors, you stockpiled or other components versus goods that you have built that haven't sold yet. Next, I'd like to ask if you have any idea about the level of inventory in channel and if you can share your thoughts on that. And then the third one is still on inventory. You're constantly like putting out new products and your product development cycle is very quick. So I'm wondering, you have 9 months' worth of inventory, let's say, what is the risk of that going out of fashion or whatever in like a year's time and having to be written down?

All right. So let me answer the breakdown. So basically, raw materials and consumables, those are the IC integrated circuit chips or cellular modems that has not been assembled into the devices yet, right? So this is the semiconductor dock pile. And then finished goods, mainly the -- it includes all the hardware. It could be some semifinished products as well. So there's that. And then... So the next question.

You reported like 270 days of inventory. But I was asking like what proportion of that is raw materials, what proportion of that is work in progress, what proportion of that is finished goods?

Okay. Finished goods is 44% of that. And then raw materials is 56%.

Okay. That's helpful. So that kind of touches my third question, which is what is the risk of inventory write-downs. Okay. Let me just get back to you on the channel inventory. So yes, we do back our channel in the inventory in our channel partners. And the net of their -- the inventory size, it's been -- I would say, in terms of number of days, it's been pretty stable. There's no buildup. And then the next one is right down. So... Yes, maybe...

Let me answer this question. So first of all, the channel--first of all, let me clarify the channel inventory. So the channel is -- okay, first of all, you need to understand one thing. These bases are nobody retain for many things. People just want to place an order, okay, this is the Amazon property. -- even for the larger projects, people want to place an order and then just want you to immediate. So that's why it's our channel partners, they do stock something. But at the same time, as these channel partners is they are not still because they are only managed. Again, in our ecosystem, most of these distributors, they are only managed. So they maintain a decent inventory, but it's not a crazy inventory. And at the same time, are we able to stop the channel no way to do this because they won't have anything like that too. And we don't want to do that because we know that's going to further -- so in other words, we don't see any channel inventory is creating any problems. And I know with these kind of numbers with scare investors, will scare you guys. So that's why we spent the time to explain to you why we are doing this because we can. The #1 thing is when we place a larger order, because it's now is the contra manufacture that we are working on is really Tier 1 contract manufacturers. So when we are able to order small substantial quantity of much larger quantity, number one thing is we see we can secure the supply relatively good. So -- and then so we are looking these guys are Tier 1 contractors to make this happen. And then -- so these are new 5G products. These are the new stuff. This is not the old stuff. This is not the thing that's going to write off trade the write-down and that kind of in. So these are the new platforms. So we believe -- so this inventory of the finished products of these goods are able to allow us to enter into new opportunities way faster because we just shared this earlier. Some of the time is maybe another other competitor is that they need 24-week  time and then we can deliver in 2 weeks' time then is a substantial advantage. And then with the substantial advantage and the customer -- this is -- I mean the new customer is able to say, "Oh, this is actually a better deal, this is action product. So this is a bad parlor to switch. So that is the case. And again, we don't see the risk of write down that much because this is all these other new chipsets and new products.

Here from Victor. Given the announced opportunities that we are going to price our cost competitively. Is there a minimum way gross margin we really cut up to increase our penetration.

No, there's no limit on that. There's no limit on that. And I think we're just looking at to do the right thing and give you to share with you some color is we are pretty proud that one of our service provider partners is actually worked with us to put our B15, our fanship product into one of the best companies in Hong Kong. And that use is -- if that's the right thing to do, we'll do it. So there is no minimum margin operate cost margin that we will intercept. No, that's not the case because in we want to see the market, and we want to ramp up the scale because we see a lot of benefit to Remuscale.

In the U.S., how do you see sales impacted by emerging regulations like the trade agreements acts, Buy America Build America that contractually limit end users' ability to procure networking solution.

Okay, the I think we are all here because we are sitting in the Hong Kong office. So I want to share that is we actually have a couple of interesting projects that is related to the transportation industry in the U.S.A., and we are doing great. And that is -- so we don't see any problems or anything like this. And again, it's -- we are here just because we are here. And that is -- but we have a lot of team members that is in Toronto, Lithuania, Taiwan, Philippines Asia yes. So I don't see this as actually that much of our problem. But I think it's a testing is very... Subject to... Yes, this is where I was objective. But we are not concerned about that.

The logic growth in recurring service revenue was in day case step both in 2021 myself. However, to this point, to show a slow growth in wireless roles and at the same time, inventory increased a lot. So how do you reach a single hardware growth have sales of 3% to mature recurring income with the highest margin keeps growing as it did last year.

So yes, Paul, I think it's -- you are based on the assumption that is our people are buying the router and then is using one subscription. But then as you know we are adding a lot of very new interesting features, including the 5G LTE data plan and things like that. So -- and also the interesting thing is we have not put into the consideration that is when we -- when the existing devices are adding to these new features. So then the people will just add more subscription than that. So I think I think this is not entirely related to how much devices sold in 2022. It is related to our order base of existing installation basis.

It's also interesting that in 2022, we saw 33% growth in a number of devices with a subscription. But then the subscription dollar amount increased 49%. So that extra around 50% came from somewhere. We did not increase our prices. So I think that really kind of came from more existing users subscribing to our services.

Yes. Again, these are the convenient features and also with our Spedition connect and it's actually based related to the consumption as well. So the SFC Spedition connect, protect and SFC 5G related to the consumption model.

Okay. There seems to be no more questions yes. Thanks Alex. Okay. Thanks, everyone, for joining the call. We'll see you again in July.

Yes. Thank you, everyone.