Plover Bay Technologies Stock

Good afternoon. Welcome to Plover Bay's First Half 2026 Earnings Call. In this call today, we have Alex Chan, Founder of Plover Bay Technologies; and the rest of the management team and also myself, I'm Christopher Tse, CFO of the company.

We just announced our results a few moments ago. You can find our announcement on the HKEX News website. The updated slides that I am currently using is also available on our website at ploverbay.com/investors/earnings.

We will start with prepared remarks for the financial performance of first half 2026, and then we will have a business update section followed by Q&A. Please note that all dollar amounts will be in U.S. dollars unless otherwise stated.

Let me begin with the financial section. In the first half of 2026, our revenue reached USD 74.6 million, up 18.5% year-on-year. Gross profit reached $43.8 million, up 25% year-on-year. Our gross margin increased to 58.8%, thanks to product mix and some sort of economies of scale. Operating expenses and finance costs reached $11.6 million, up 13% year-on-year. Finally, net profit reached $27.7 million, up 28% year-on-year, with net profit margin reaching 37.2%. During the period, diluted EPS was USD 0.025 per share, and we declared an interim dividend of HKD 0.1566 per share.

Let's go into the details. First, revenue breakdown by segment. Fixed First Connectivity segment increased to $10.9 million, increasing 44% year-on-year, while Mobile First segment increased to $40.3 million, up 9% year-on-year. Overall, the increase in both segments was attributable to strong growth from purchases from MSP partners. And we also saw some of our edge computing products growing quite strong as well, which is reflected in the Fixed First segment.

Next, the Warranty and Support Services segment increased 21% year-on-year to $16.2 million. Software Licenses segment increased to $7.1 million and increased 41% year-on-year. Overall, the increase in these 2 segments mainly came from the continued growth of recurring revenues from subscriptions.

During the period, recurring revenues accounted for 30% of our total sales, reaching $22.1 million and increasing 25% year-on-year. In comparison, nonrecurring revenues grew 16% year-on-year. Meanwhile, the number of devices with a subscription increased by 26% year-on-year from a year ago, and the take-up rate further increased to 41.4% compared to 38.6% from 6 months ago. These indicators both point to continued future momentum of our recurring revenues.

Next, in terms of geographic regions, our sales in North America grew 27% year-on-year to $43.7 million. Our sales in North America was driven by growth across a wide cross-section of customers and industries, which include the MSP customers that I previously mentioned. In EMEA, our sales decreased by about 3% to $19.9 million, mainly due to the timing of a large multiyear project. However, sales growth across multiple countries in this region also grew at a remarkable pace. Our sales in Asia and other regions also performed very well, together growing 35% year-on-year. Growth was particularly strong in Australia and Japan.

Moving on to gross margins. Our gross margin increased to 58.8% during the period. The increase in our gross margin was partly due to favorable product mix towards high-end products and also, a higher mix in recurring revenues. Having said that, cost of components such as memory chips remain highly volatile, and we will do our best to maintain gross margins within our historic range in the coming months.

Next, our operating expenses. Our operating expenses increased 13% year-on-year to about $11.5 million. The increase was mainly from new hirings in R&D and marketing. The increase is modest compared to our revenue growth. So that once again points out our strong operating leverage.

In terms of percentage of sales, operating expenses was 15.4% of total sales compared to about 16.1% in the first half last year.

Finally, on balance sheet and cash flow, the main changes are in inventories and trade and other receivables. The increase in receivables is mainly due to commitments and deposits paid to manufacturers and suppliers to secure future components and allocation. And the increase in inventory is due to increase in raw materials. Our raw materials balance within inventory increased almost 3x compared to December 2025 levels. And this is because we have taken steps to ensure we have enough components to build into finished products for customers and our growing markets.

Overall, we feel that the memory cost increase is manageable. And as I said previously, we'll do our best to keep it within -- keep the gross margins within historical levels.

This wraps up our sharing of financial results. I will now invite Alex to give us a business update.

Thank you, Chris. So, on the first half, we are particularly excited about 2 important things that is happening around Plover Bay. So we are working very closely with Starlink. And then there is the multi-Starlink solution that we have been pushing has been very well received in the market. So people are -- the market and the customers are realizing that with the multi-orbit -- multi-Starlink solution, this can increase the uplink substantially, and it enables a lot more applications. So the Starlink thing is very exciting. And then as well, we are working on a number of new products, including some new products that is related to the direct -- yes, to the DTC market. It is directly using mobile technology to connect to the satellite. And then as -- so we also have other things that is happening that is exciting. That is the physical AI.

So we are working with a couple of leading autonomous manufacturers, and they are using our technology to make these autonomous systems, teleoperated systems, stay connected. So I would say is these two things are going to be a new growing market for us, alongside with the market that we have been serving for the last 20 years.

And I want to emphasize once again is, we serve a very long-tailed market. So we do not rely on one particular market because we make connectivity reliable, and this reliable connectivity is actually needed by almost all industries.

So I think we can take questions now.

Sure. [Operator Instructions] First question is from [ Warren Yang ].

I'm just curious of what you call the mobile segment is going to and that disappointed you?

Sorry, Warren, I can't hear you very well.

Can you hear me now?

Yes.

Yes. Congrats on the great result. I'm curious to hear what your views are on the mobile segment growing 9% year-on-year. If that was lower than your expectations?

Yes. So Warren, can you repeat your question, please?

Warren, maybe we'll move on to the next question first from Adrian.

Hello? Can you hear me?

Yes.

Well done to the team. Excellent results again. I've got 2 questions. The operating cash flow dropped quite a lot to about $15 million from $22 million the previous half. So I just wondered whether you could provide a bit more color into that.

And secondly, I see that Starlink are making their own routers. I suppose Plover Bay supplies more the enterprise customer, but I just wanted your views on that as well, please.

Sure. Operating cash flow is mainly because of the increases in trade and other receivables and also inventories, as you can see in our balance sheet, right? So inventories increased a lot, as well as, to a lesser extent, our trade receivables. I think that's a normal course of business.

Okay. Yes, let me add a little bit on that. So basically, yes, we are stocking up a lot of memory and cellular modules and the needed components to build products. But at the same time is, these products have a very long life cycle. So first of all, again is, we are not in the consumer business. We are not in that space. And then is -- so, the inventory that we take is we see that as a strategic move. That is actually important to make sure that we have the product supply to cope with the growth. So that's why I say it might look like impacting the cash flow, but at the same time is, these things are not sitting at the warehouse doing nothing. So you will see is that these inventory are turning into products and turning into revenue and turning into profits. So, yes, we are not too concerned about that cash flow issue.

And then -- so regarding your second question about the Starlink router, we do not compete on the consumer space or we do not -- okay, so we do not address the consumer market. We are mostly on enterprise market. And now with the enterprise market, the product requirements are very different. So we do not compete with the Starlink router, but at the same time, we are just making the Starlink and other networking technology like 5G, other LEO technology, we just make them work better.

No, that's great. And just 1 more thing on, I suppose, capital allocation. You've previously been paying a dividend. Would you consider share buybacks with the share price has taken quite a drop maybe from the all-time high of about 30%? Any thoughts about that? Do you think it's due to jitters about the upcoming demerger?

Actually, we are very open in looking into different ways to increase the shareholders' value. I think, yes, earlier today, there's an on sale. We cannot do that this morning. Oh, no, not this morning. We cannot do that a couple of hours before. Right. But yes, I agree with you. Yes, when there's another moment like that, we should seriously look into the share buybacks.

Maybe, Warren, would you like to try again?

Sure. Can you hear me now?

Oh, yes. Very well. Yes.

Yes. Congrats on the great result, and sorry my mic had an issue earlier. I wanted to get your thoughts on the Mobile First segment growing just 9% year-over-year, in the first half. Was that lower than your expectations?

Oh, Warren. Yes, you know what, actually, when we look into the products, I think is the Mobile First or Fixed First, sometimes this is getting harder and harder to differentiate. The reason why is, as I mentioned earlier, we address a very long tail market. So when people are working in the construction site, when people are using our product in the construction site, most of the time, that is a fixed deployment. But then is when people are using that in the boat or in the train, and that's a mobile deployment. And then as we are getting more and more powerful devices, and these more and more powerful devices, it's getting harder and harder to differentiate whether that is a Mobile First or Fixed First. So that's why I think maybe you can look into the hardware devices as 1 bucket.

Sure. That's very clear. And also a question on your operating expenses. Yes, it grew much lower than revenue growth, but it's still higher than history. So I'm just curious if this should be the normal rate of growth in operating expenses going forward.

So, of course, we need to treat our team very well. We need to have salary increase. So, yes, I would say actually our biggest cost is salary. Yes. We keep hiring people. And then so is the salary cost is actually the single biggest cost for our SG&A. So I would say is, you can assume is that, SG&A will keep growing.

Understood. And just 1 final question from me. I think you mentioned that the Europe, Middle East region had the effect of a high base because of a multi-year project. Has this multi-year project concluded, or it was just not very active during the first half of this year?

Oh, no, no, no. Yes.

It's mainly project timing. So the delivery schedule didn't happen in the first half, that's it.

Let me clarify that. That is EMEA, Europe, Middle East, Africa, so it's not particular to Middle East. It's the whole region.

We can take some questions from the chat. So first is from [ Lucas Liu ]. Level 2 bridging network poses significant risk to retail or branch offices. With the new generation of SASE architecture, all equipment can incorporate to SD-WAN moving from L2 to L3 levels. So will this reduce the client's need for the company's expertise in L2 bridging?

Oh, no. Not really. Not really at all. Yes, I think is what people look -- okay, the fundamental value that people look into our products is to make it more reliable. So it's the multi-WAN capability is actually more important. The bonding capability is more important. And then is that with all these SASE architecture, 0 touch architecture. Layer 2, Layer 3, and all these kind of things. This is very industry standard. There are tons of solutions being able to do that, but our biggest value is the multi-WAN bonding.

Next question is Marlink, is Starlink's authorized integrator and a major MSP in maritime markets? Has the company considered collaborating with Marlink to provide, for example, ship side link bonding services? In addition, will mainstream shipping companies, such as Maersk, consider to bypass MSPs such as Marlink and partner directly with the company in the future?

Okay. So, we have a very strong ecosystem, and our ecosystems is including as a MSP, distributors, and resellers. Our partners are super important to us. And so, it is always not our intention to bypass anyone for better margin or anything like that. We don't need to do anything like that. But at the same time is, we keep rolling out new products, new technology and solutions with our channel partners to address the market need. So we are very open in working with everybody in the industry. And actually, we have some really exciting partnership that's going on. But we're not going to name them -- name these names here. But I would say is, in general is, our technology is being recognized as the market leading technology. And then as always, we have a lot of partners, they treasure and value our technology and wants to work together. And at the same time, we respect their knowledge in the vertical market as well as the market presence. So we would love to partner with all these partners.

Okay. Next question comes from [ Mufasa Capital ]. So the first question is, what opportunities do you see in space data centers? Are you doing anything proactive to capture this market?

Okay. We are doing what we are doing very well. That is to bond multiple links reliably. And then this is our fundamental business, and this is what we should focus on right now. And then whatever happens in the future about the space data centers and things like that, just like any other opportunities, we'll have something when it happens.

And are there any updates in the robotics vertical?

Oh, yes. Robotics is very exciting. So we are seeing is that, there are a lot more robotics physical AI devices around, and most of these devices are actually small robots or small delivery robots. So all these robots, this is a very -- okay, this is a very interesting market. Because when people are running a fleet of robotics, a fleet of small delivery robots, they need good, reliable connectivity for these devices to download the mission data and to upload the operations data for AI training purpose. So yes, these people, they see mission critical connectivity is important, and that is exactly the market that we do very well. So we are seeing this market as very exciting, and we are going to have a lot more products heading into that market segment.

Okay. Another question from [ Mufasa Capital ] is, when can we expect the spinoff of the U.S. business?

At this moment, we do not have a concrete timeline to provide. However, all the preparation work is underway. So we are seeing the project is still going smoothly.

So what I would add is like just for the spinoff exercise, we are not just wanting to rush it and get it done. We want to do it right as well. So when times come where we have a concrete timeline that we can provide, we will definitely be sharing with you all.

And then the next question is from Gerard Ho. Is there a catch-up effect on U.S. revenues after soft numbers in 2025? Is the momentum still good in the U.S. for the second half of 2026?

Oh, absolutely. We are seeing is that the momentum is still very strong for U.S. and EMEA.

Next question, [ Lucas Liu ]. Regarding to manufacturers in the autonomous driving field, will the company sell modules integrated into their ICs or sell them complete router products?

Okay. So we are working on a number of new generation of products. So ideally is, we want people to feel like is that they can have a plug-and-play module for their robotic systems to make the connectivity reliable. So that is our goal.

Again from Gerard Ho. Beyond Australia and Japan, have you opened new countries recently?

Not really. Yes, not really. I think as -- actually, with -- okay, maybe I can share our philosophy with everyone. So we always look for quality instead of quantity. So we want to be the market leader, or we want to be the most lovable product in the space that we work with. And then so Australia and Japan, actually these two countries are not our new market. We have been working in these markets for more than 6 years. And then I would just say is, just like most of our business, we grow organically. And then so growing organically takes time. But then we see is that this approach is actually doing very well for the company, and it is way more sustainable and more robust. So we are going to continue with this, and that's why we said we are not really rushing into entering new markets.

Okay. Put it this way. New countries. Yes, new markets, new applications, new vertical markets, yes. We always have a lot of new exciting vertical markets coming up because we serve a very long-tail market. But in terms of geographics, we are not really -- we are -- we rather focused on the market that we're starting to have an infrastructure in place. We're starting to have strong partners, resellers, distributors, and customers. Yes. We'll continue to work on this approach.

Next question from Andy Chan. Can we provide more colors on the increase of receivables?

So as I said, the increase of receivables is mainly because of commitments paid to our suppliers to secure production capacity or future supplies.

Next, Jonathan Tan. Going forward, margins is 58%, even higher than 55%. So is this -- 58%, is this a sustainable level to keep going, or do we expect to keep going up? So given that memory price is also increasing.

Jonathan, I think it's because we are seeing is customers are deploying more and more higher-end models from us, and traditionally, it's our higher-end models have a higher margin. Actually, it's a much higher margin than the entry-level products. So I would say is that the memory price increase is not really the big contributing factor for our products. I would say is along the road is we have more and more software features, software subscriptions, and the higher-end models deployed by the market. And these things are making a bigger impact on our gross margin than the memory price. So I would say this is more like a product mix. This is more -- okay, the increase in the margin is actually contributed by a different product mix. We are seeing customers are deploying more and more higher-end models from us.

So I think it's your spin-off timing. Cherry just shared the status with everyone.

See, the latest percentage of 5G products. In terms of sales, it's around -- it's over half of our hardware sales now. In terms of volume, it's also over half.

Have you increased your selling prices to take into account the higher cost of memory and components?

Yes, we do. But it has not reflected yet because the effective date is on 1st of July.

From Jonathan Wong. How does the Middle East conflict doesn't create any risk for our business?

I think it's -- our Middle East business. Okay, we group everything into EMEA, Europe, Middle East, and Africa. Our Middle East business is actually relatively small, so it's not really that affected.

Next is from Jonathan Tan. Take-up rate is 41.4% today. And do we still target a 50% to 60% take-up rate as our long-term goal?

Absolutely. Absolutely. The goal is to increase the take-up rate for this.

A question from Kenneth Yip. Please elaborate more about the future of edge computing. Do you see your customers using Peplink edge computing products for AI applications?

Yes, absolutely. We are seeing is the edge computing is a very interesting area. And I hope I can share some of our new product roadmap with you right now, but I couldn't. But yes, you're right, we are seeing is our customers are seeing -- customers are deploying more and more edge AI applications. And we'll have a product series to address that.

Okay. From Adrian Chang again. Any news on who will be the CEO of the retained group? Is it a promotion from within or external?

Oh, absolutely. Actually, so the person is -- we have identified the person, and the person has been with us since day 1. So he's not a young guy, but he is well respected in the company.

From Jonathan Tan. You mentioned physical AI in your remarks. How material is this now and in, say, 5 years? How big can this vertical be?

Right. I think a lot of new technologies are very exciting. But this market, we know this is a true market. This is a real market. I would say is that the physical AI in our world is more like autonomous systems, tele-operated systems. And then we all know this is not talking about a consumer space. This is talking about is the -- like a construction site, or this is talking about the dangerous or hard-to-reach areas. So we are very optimistic about that market because in that application, it demands reliable connectivity, super reliable connectivity. And also, in those areas, usually these areas are hard to reach and having challenge in standard connectivities.

There's another question from [ Kate Luong ]. Kate asked that are we worried about competition from Starlink? Asking because they are -- they have been moving into mobile.

Oh, no. We don't see that as a -- we don't worry about that because I think, again, fundamentally is, we are a multi-WAN company. We just love multiple connections. And then the value of multiple connections will just make the network more reliable, just to make the network more resilient and to make the uplink faster and to make the downlink faster. So with all these kind of things, no matter that is a satellite connection or that is a mobile connection or fiber connection or a wireless point-to-point connections, we can add substantial value to these connections. So we are not concerned about that.

From Gerard. Will we keep the same payout ratio for the new U.S. list co?

Yes, actually, our way of operations or the way that we operate the business, it won't change. Of course, I will say is that, it also depends on the market situation at that time. But our approach is always is to distribute the excessive cash that we don't need back to the shareholders.

From Jonathan again. So looking at our operating cash flow, should we expect inventory to normalize during the second half and cash conversion to return towards historical levels? Or is this structurally a new working capital requirement as we grow?

No, actually, it all depends. So for example, if we are seeing the memory price or components cost, if we see all these things keep going up, of course, we would like to stop the inventory. Yes. And at the same time, it also depends on the software business, the subscription business. Don't forget our business model is whenever we sell the devices, the hardware, then it goes along with a subscription. And then with all these subscription, it generates pretty good cash. So I would say is it's hard to predict at this time, but I don't think there is anything we need to worry about the inventory level and the cash flow.

So a follow-up question. I think this is in relation to the competition with Starlink. So Steve Wang asked about the competition from Digi International or Cradlepoint.

Yes. So we have been working for 20 years, and these guys are also in the industry as long as we do. So we know each other, and we grow together. And then so we all live in the same kind of planet. So we don't see we are killing each other. And it looks like everybody's doing a good job.

And from Brian Cheung. Do you mind sharing Peplink position in direct-to-cell?

Yes, absolutely. This is actually very exciting. So imagine that when there is a direct-to-cell, that means is everybody's cell phone can connect to the satellite. This is great. Because it also means that any cellular radio can talk to the space. And then so when there's situations like that, then people will start to say, "Hey, can I have a faster speed? Can I have a more reliable connection?" And in that case, they will need a product from us to bond these multiple cellular connections together. So I think this is just expanding the market that we have. And actually, we are also working on some interesting products that I'm very excited. And that is -- the direct-to-cell is another technology we'll benefit from.

Yes, I don't see any new questions from the chat or from our other participants. So thanks everyone for dialing into the call. We thank for your support I think -- okay. So we'll end the call now?

Yes. Thank you, everyone.

Good evening. Welcome to Plover Bay's Annual Results Call for financial year 2025. I'm Christopher Tse, CFO of Plover Bay, and I will be hosting this call. Alex Chan, Founder of the company, is also with us today.

We have announced our latest annual results. The announcement can be found on HKEX's website and our own website at ploverbay.com. The PowerPoint presentation that I'm currently sharing on the screen can also be found on our website. As usual, I shall begin with the financial highlights, and then Alex will go through our recent business updates, and then we can go into Q&A. Let us begin.

Our sales in 2025 reached USD 130 million, increasing by 11% year-on-year. Our gross profit was USD 74 billion, a year-on-year growth of about 15.5% and our gross margin was 57%, an increase of 2.1 percentage points. Our overall operating expenses and finance costs increased 5.1% year-on-year. As we continue to benefit from operating leverage, our net profit reached USD 45.5 million, a year-on-year increase of 19.5%. Net profit margin improved to 34.9%, an increase of 2.3 percentage points.

Finally, our diluted EPS came to be USD 4.11 per share, which increased 19.1% year-on-year. Let's drill down to our segments. In 2025, our Fixed First Connectivity segment revenue increased mildly by 3.5% year-on-year to about USD 18 million. Mobile First Connectivity segment increased 10.4% year-on-year to USD 73 million. Overall, we are seeing strong growth in high-end mobile first routers and new supporting products.

Sales of Starlink equipment is included in the Mobile First segment. And this year, we are seeing quite strong volume growth. And because most of our channel partners pair our products with Starlink into a solution, this strong volume growth has also directly benefited the sales of our own products. Driven by our continued growth in subscriptions, our Warranty and Support Services segment reached USD 28 million, up 12.3% year-on-year. And Software Licenses segment reached about USD 11 million, up 34% year-on-year.

Together, the recurring revenues in these 2 segments add up to about USD 38 million, an increase of 17% year-on-year. Recurring revenue now accounts for close to 29% of our total sales. Our take-up rate has increased up to 38.6% from 34.2% a year ago, and the number of devices with a subscription increased 25% year-on-year. These numbers continue to show that our recurring revenues are healthily growing.

Next, in terms of geographic segmentation, North America increased 2.1% year-on-year to USD 76 million, accounting for about 59% of our sales. The mild growth of North America market is largely due to tariff uncertainties back in April, where we had to hold product shipments to the U.S. for about 2 months in the first half. Shipments have since resumed normal in the second half. Sales to EMEA increased about 28% year-on-year to USD 37 million as our partners continue to deliver their multiyear large projects and now account for about 29% of our total sales.

Sales to Asia increased to USD 12 million, growing 36% year-on-year. Again, our growth here is because of some large multiyear projects delivered by our partners, plus some remarkable growth in new markets such as Japan. In others, mostly Australia, our sales increased 14% year-on-year, making up about 4% of our total sales.

Moving on to gross margin. Our gross profit margin increased to 57% from 54.9% last year. Our gross margin improvement is attributed to a favorable product mix towards high-end mobile routers and economies of scale among our high-volume products. Overall, our hardware gross margin is now 41%, while recurring revenue margin is over 90%, both contributing roughly half of our gross profit.

Next, our operating expenses. Total operating expenses as a percentage of revenue was 17% of sales during the year, which is 0.6 percentage points lower than last year. Due to our strong operating leverage, our sales continue to grow faster than expenses, which contributed to our net profit growth this year.

Finally, our financial positions continue to be very strong with no debt and strong operating cash flows. Trade receivables, turnover days remained at 67 days. Inventory turnover days slightly decreased to 112 days, while trade payable days increased to 50 days.

This wraps up the financial highlights. Next, I will let Alex present the business update.

Thank you, Chris. So to begin with, I want to have -- I want to give everybody a quick recap. So basically, we are in the connectivity market, and we serve a very long tail market. So we have thousands of customers in multiple verticals from maritime, transportation, public safety, construction and so on.

So there is no single customer or vertical dominates our business. And we have also gone through multiple technology cycles from fixed to wireless, from 3G to 4G to 5G. And now we are seeing is satellite communications as a very promising way of connectivity. And we were in this market for 20 years. And every time when there is a new technology coming up, a new technology application coming up, usually, we are ready for that market. For example, recently, we have seen the autonomous systems, the teleoperation. And all these applications are having more and more sizable deployments.

So in the past, a couple of years back, we were seeing autonomous driving companies were using our products for their product development. But now we are seeing is a teleoperate -- we are seeing is a remote operations, teleoperated cabs, they are massively deploying our products with their vehicles. So I would say is the importance of connectivity is actually way beyond a lot of people's imagination. And we are in the business of making this connectivity reliable.

So -- and also you probably will ask one question is about the increased memory cost and the components cost. Just like every other hardware company, we are not immune to this. So we are also facing is the increased cost of -- in building the hardware. However, our business model is actually helping us to mitigate this because every time when a customer is buying and packing devices, it has -- we have the opportunity of selling multiple year's subscription services.

And then also with this blended model, we are able to absorb some of the hardware costs. But at the same time is our customers are buying our products not because of the cost of the components or the cost of the product. They basically is buying our product because of the value, because of the value creation they can have with our product or they can use or because the reliability of our product is helping them to minimize the downtime. So this is the foundation of our business.

And I guess today is probably many of us will have a question about why do we announce our plan to spin-off our North America business through a distribution in species. So we are seeing that the U.S. market and other parts of the world, the market has very different requirements. So for example, now we need to meet the TAA approval, NDAA approval and all the kind of compliance thing, then we are limited to certain supply chain, we are limited to produce the product in certain locations.

And then we are also restricted to use certain technologies. So it will be difficult for us -- okay, we are seeing that -- so our business in the whole world is growing. But then it's difficult to run that in under one platform. So we are seeing that if we are able to separate the 2 operations, one to be really focused in the North American market and the other market, which is the global market, then we are able to produce more competitive products. And at the same time, we are able to expand our supply chain, including our contract manufacturers and the choice of components. So this is actually the foundation -- fundamental reason why we are doing this.

So -- and then -- so moving forward, so maybe our investors may have a concern that -- so are we able to remain our lean operation just like the last 10, 20 years. And I think we should be able to do so because now we have a lot of AI tools you do not need a lot of people to do many things. And then so we are seeing is that this is a great opportunity for us to grow further and to keep our lean operation models. So I think that this is the current update. And I'm sure that today, we will have a lot of questions. So maybe we'll just reserve the time for the Q&A.

Sure. So we already have a few questions from the chat. So first question comes from Lucas Lu, question on marine certifications for cybersecurity compliance. So why not apply for these kind of certifications? And what are the main difficulties?

Okay. So Lucas, I guess you probably are referring to the discussion at the forum. Yes, we are aware of that, too. So I would say is when people bring that up, yes, this is a legitimate concern. But at the same time, we are very clear about our position because our business is to make connectivity reliable. So all these cybersecurity concerns, cybersecurity requirements can be addressed by putting UTM or cybersecurity products there. And there are plenty of cybersecurity products available in the market. So some people choose to integrate that into one box. But we feel like the cybersecurity product is more like a preference. Some people might prefer cybersecurity vendor A and some people might prefer cybersecurity vendor B.

And that is -- so we feel like we are still in that market by offering unbreakable connectivity by putting multiple Starlink, multiple satellite connections, multiple 5G connections together and make it super reliable. And then so for the cybersecurity requirements of compliance, people can easily apply or people can easily put a third-party cybersecurity product there and to meet the requirements. So that's why I would say is do we really need to integrate that into our products? Yes, it's a nice to have, but it's not a must. So that is our view on that. But again, we are very practical on all these kind of things.

So you will see is, we will be also partnering with some of the leading cloud provider to provide certain cybersecurity features. But again, those -- yes, in the coming months, you will see we have a products like that. So the short answer is, we are not taking the approach where people expect us to be -- to solve that concern. But there are multiple ways meeting the same requirements.

Another question from Lucas. It's about WireGuard support. So the company has many distributors and clients who need the support. Why not provide it? What are the main difficulties?

Okay. Many people can provide WireGuard support. I don't think this is a deal breaker. Yes, of course, we hear the feedback, and we will provide that. But again, our fundamental business is not to become a me-too company. Our fundamental is not just to catch every single Wi-Fi standard being the latest one or we are not here to be the most feature-rich product. But our business is just to make connectivity reliable and be the best company in doing reliable connectivity. So yes, WireGuard support, we will support that. But is that our first priority? I don't think so.

The last question from Lucas. The number of companies retail -- the number of the companies, retailers and distributors has dropped a little bit since last year. As a result, this is why our revenue growth rate also slowed down.

So let me answer this. I think the number of distributors or retailers that I don't know where you found the number from, but then it's way more than 300. So I think our revenue growth this year, as I said, there were a few reasons that they were 11%. So the U.S. tariffs was one of the major factors. It caused us to stop our -- halt our shipments for 1.5 months. So that did affect our sales quite a bit.

So Lucas, let me remind one thing is we are in a very long-tail market. So I guess your focus is more on the retail or the consumer market. Yes, that is one of the long-tail market that we address, but that is not the only one.

Okay. Next is from Jonathan Tan. On this proposed separation, should we think about this as a valuation unlock or recognition that North America and the rest of the group now have fundamentally different capital allocation, growth investment and operating models. And as a long-term shareholders, what specific metrics would you point to in 3 years' time to judge whether the separation has truly created value?

I guess we are looking into all these things is not really coming from a financial angle. Most of the time we are looking into how can we be the predominantly market leader or the de facto standard in that segment. So for example is in tele operations, we want to be the market leader and the de facto stand there. And in the maritime we want to be the most welcomed product in all these -- from superyachts to container boats, yes. So we want to be the market leader in all these areas.

And then so when we look into that, I would say, we would love to -- in the next couple of years, we would love to see is, we have more and more vertical markets that people are using our products being the de facto devices for reliable connectivity. I think that is our primary goal. And again, the concern is mostly related to North America, they have different expectations and requirements. Just like what I mentioned earlier on is -- so we need to -- let's say, if this is a cellular product, it needs to be AT&T, Verizon and T-Mobile certified. But then if we are going to a different market in Europe or in a different market in Africa, we might not need those certifications.

And then by separating these 2 markets, we are able to expand our choice of contract manufacturers, technology providers, components, semiconductor choices, we will have a wide more choices for addressing different markets.

Next is from Brian Chung. So what is the number of in control to registered users in the year-end? If I recall, the number has exceeded 800,000 by year-end. What is the likely impact on the gross margin given current shortage of RAM and storage? Or will the cost be passed down to customers?

Okay. So some of our high-end models, we do not have any intention in adjusting the price yet. But at the same time is if we need to increase the price, I think the market will have no problem in accepting that for the higher-end models. And that is so for the entry-level products or for the higher volume products. We also do not want to or intend to increase the price at this point yet because, again, it's just like we explained earlier, is our business model is there is usually a subscription goes along with the devices. We would love to see the pickup rate. We would love to see the expansion of those subscription business. And then also the hardware devices is just an entry point.

So I think it's we -- okay, again, the memory price, we just don't know how crazy it can become, but then we have a lot of flexibilities in dealing with that. But in the meantime, for the time being, we are not increasing any price yet.

The next is regarding to recent AI development is happening currently or will soon be using AI on traffic decision and/or identify cybersecurity risk. What are the threats and opportunities of AI?

We are using -- we are already using a lot of AI internally. And we are very excited about all these applications. And at the same time, yes, we are definitely working on something which is AI-based and that is -- we believe that kind of product will be able to help us to visualize the value that we bring in with our bonding technology and together with our existing product services. Yes, we are working on that, and we are very excited about what we have seen.

Next, regarding the spin-off, which company will own the intellectual properties?

This is Terry. I am a member of the Board as well. And in regard to this question, it's unfortunate that there's little of the specifics that we can disclose at this point. But then I think it's safe to say that like in our plan, we are definitely making plans to ensure that both groups will have the necessary resources, including the IP they need to continue to thrive. And then when the times come to a stage where we are in a position to discuss more, we believe we will be sharing the details with you like in our later announcement.

So will the SpinCo become a pure U.S. company so that it can avoid all the consequences of the geopolitical frictions?

Okay. So the SpinCo is -- the ultimate goal is to address all these concerns. So I would say that is definitely the direction.

And do we see more growth in 2026 in the U.S. market?

Absolutely. Yes, U.S. is very -- I would say is U.S. and Europe are 2 very interesting major growth market for us.

Another question on spin-off. With regards to the proposed spin-off, how can shareholders expect future dividend payouts to be in terms of the SpinCo and RemainCo. Can you provide some color on the different growth trajectories for SpinCo and RemainCo in the mid to long-term?

Okay. I would say is if you look into our operations from day 1. So we always distribute the excessive cash back to the shareholders. And yes, we are not going to change this approach, and we plan to -- we still plan to do the same thing. But at the same time, is just like we mentioned some years back is when there are opportunities where we can grow the company faster or to dominate a market better, we are very willing to look into the M&A and then -- so we are very willing to look into opportunities to expand the company. So dividend is not the primary thing. But our approach, which is by distributing the excessive cash back to the shareholders, that's always the case. But again, it really depends on the market opportunity. And our goal is always to look into sustainable growth and being a major player in the areas that we are -- in the area that we are in.

Next is from Marvin Young. Could you please provide an update on progress of Starlink business?

The Starlink business is actually doing pretty well. And then -- so first of all, we are covering the entire Starlink product line. And then we are also working on something more interesting that is related to the Starlink APIs. And then is also -- at the same time, as you probably have seen is we have some products like Antenna MAX, which is a product that we can integrate the Starlink antenna, which is the Starlink Mini together with our 5G routers into one integrated box.

So moving forward, you will probably see is that we will have a series of Starlink companion products, which is to make the Starlink deployments better. And eventually, this will be benefit for multi-constellation deployment. So we are seeing that now -- we are seeing that just like the 5G connections, people eventually might want to have more than one Starlink connections. People might even want to have multiple Starlink or multiple satellite connections in order to fill over the fiber network or in order to provide better connectivity for their boats -- for the container boats for the cruise boats or even for logistics centers or data centers. So we are very excited and optimistic about the Starlink centric ecosystems.

Okay. Next is back to Gerard. MNCs have operations in many countries, and they usually don't spin off their businesses. Why cannot we manage different geographies?

Because we are taking a different approach. Yes, we never think about MNC. But instead we think of we are still a small fish in the pond, but then everything when we look into this is entirely coming from the efficiency point of view. And don't forget that we have a large network of channel partners. And our channel partners usually are way bigger than us. And then is so they are -- most of our channel partners are taking the traditional approach. And that is so, I would say, is with this approach, we should be able to expand the supply chain. We should be able to expand the choice of semiconductor chips. We are able to expand the choice of contract manufacturers, cellular modules manufacturers, SoC suppliers and even AI models. So that's why we are seeing this is way more important than the traditional way in doing business.

Next question from [ Mufasa Capital. ] Could you update us on the development in drones and robot taxi?

Yes. As I mentioned earlier on is we have one deployment in Las Vegas. And then so this is not entirely robotic taxi, but it's a teleoperated taxi service. And the entire fleet is using our products and then we are very glad to partner with our customers to do this. And at the same time is we are seeing -- this is one major deployment. But at the same time, we also have another customer in Europe. So they're using -- okay, they apply teleoperation for the mining trucks, for the mining equipments. And then so these autonomous vehicles, these autonomous trucks, these autonomous equipments are actually very exciting because they all demand reliable connectivity. And at the same time, with the drones and then these kind of markets, we believe this is going to be multiyear opportunities for us.

Next question from Gilbert Lowe. Can you share the plan and performance of the SpeedFusion Connect app? Any business plans with SpaceX direct to cell technology?

So the direct to cell technology is more related to the cell phone. And I would say is the application of the direct to cell at this stage is more related to messaging. And of course, as the technology evolves, we won't be surprised later on then the DTC technology will become faster. And then the idea of the SpeedFusion Connect on the phone is, again, is to expand to a new market. I guess if you look into the forum, some people are asking us why do we -- why don't we build a travel router?

And I feel like our view in looking into the travel router market is probably the best travel router is your phone or maybe we all have the last generation phone together with us. And then -- so maybe we are running a SpeedFusion Connect app with these phones, then this is actually the best travel router. You do not need to carry extra charging batteries and this and that. And at the same time is the SpeedFusion Connect can go into the Android market, which is being used in a lot of kiosks or embedded systems.

So I would say is the pace of the SpeedFusion Connect is encouraging. But at the same time, we are still learning about the possibilities of that. And we're still working on that. And I would say you can see this is not contributing to any meaningful revenue yet, but it's the future of SpeedFusion Connect is pretty broad. And we believe that is going to be an important piece of element, which can help us to go into and expand into some new exciting consumer markets.

The second question from Gilbert is, I assume shipments would have resumed in Q3 and Q4, any particular reason for the slowing down in the revenue growth in the U.S.

So as I said, in the U.S., when tariffs -- there was some kind of tariff uncertainty in April, in the second quarter of the year, right? So we -- due to this uncertainty, we stopped shipment to the U.S. for basically the entire second quarter. And that is why that this year's U.S. sales has been affected.

Next is from Jonathan Tan again. So a follow-up question on the spin-off. Will 110 entity sell to Frontier going forward or will both?

It depends on the country. It depends on the region.

Essentially, our split will be one based on the geographical split. And so like for one transaction, obviously, they can only go to one of the locations. But then it might well be the case that any one customer, they can be having different locations. So if that's the case, then yes, it's a possibility that both can be selling to the same customer, but it would definitely be for different transactions.

Will SpinCo consider retaining dividend and excess cash completely due to the inefficient dividend tax scheme in the U.S. growth project...

We will definitely look into the possibilities on how to optimize this. But the fundamental is the same, yes, the idea is any excessive cash that we don't need will be distributed back to the shareholders.

Next, Steven Wong. Will you still be the Chairman of both companies? Will there be any change in HQ and the makeup of senior management?

Alex will stay the Chairperson of both company, but then his role in Plover Bay will transit to a nonexecutive role. And also Kit, our current CEO, he will also become the CEO of the SpinCo rather than Plover Bay. But other than that, all other Executive Director will remain with Plover Bay.

Liam or Brian, when will we get details of the U.S. company? Where will those details be? And will we need to be able to invest?

For the U.S. company, essentially, we assume there will be more information coming as we make the announcement for the EGM. Those information will be disclosed alongside. But obviously, for us to disclose those details, we will also need to get our U.S. authority get things ready with them. So as far as the investment speaking, let's say, for the current shareholders as we are doing a distribution in species unless there are like restrictions coming maybe from your holding or your funding itself. Otherwise, we see that like all current shareholders will be able to get their same shareholding in the same proportion for the new SpinCo.

Next is from Jeff Peng. How do you plan to split your time between SpinCo and RemainCo. The U.S. business is the largest, but there are also new initiatives for the RemainCo.

Okay. So I think I'm a long-term guy. And then I'm also a product guy. So what I look into that is what kind of product, what kind of services that could be impactful for the future. And then I'm not the guy who is to really build and make that happen. So we have teams on both companies on both sides to execute that. So I think the role itself does not change really that much, but it's on the execution side, we will have some -- we have a dedicated team focusing on the products and services that could be most competitive for that market.

We have another question from Mr. Leung. Regarding the spin-off, is circumventing U.S. regulatory and policy risk one of the considerations?

Well, let's say we are not looking at this as a circumventing perspective, but definitely, complying with the U.S. regulatory and policy issue will always be an issue. It's not just about we are going to list, we are planning to list in the U.S., but in our day-to-day business, obviously, those are also regulations and policy that we always have to observe.

U.S. business accounts for a significant portion of revenue. Following the spin-off, will this weaken the interest of Plover Bay shareholders?

No, not really. As I mentioned earlier, Europe is going very well. Yes, Europe is going very well. And in fact, Asia is going pretty well, too.

Will U.S. companies bring in strategic investors before going public?

This will be a distribution and species. So basically, we will distribute the U.S. company according to the ownership that you have in Plover Bay. So at this stage, there are no strategic investors.

Next, will the total fixed cost increase substantially because now we need 2 separate management teams.

I think we have a very good track record in making things very efficient, super-efficient. And again, it's -- we are still the same day 1 guy and then -- for those people who knows us, yes, we're still pretty cheap and still pretty efficient. So again, with the AI tools, I think there's a lot of automation that we can do with it. So maybe initially, there are more compliance costs and this and that. But I would say is the operational cost, probably it won't change materially.

Okay. Next from Graham Rhodes. What makes the spin-off a better solution than relisting the whole company or keeping everything in one company, but creating a new subsidiary or brand? Is there a geopolitical consideration?

As I mentioned earlier, so what we do is we just want to be the de facto standard to be the most preferable partner in certain markets. So that is our goal. And then we feel like with this approach, this is probably the most efficient way to accomplish the goal.

Second question from Graham. One customer is a very large share of revenue. What is the economic relationship? And what are the downsides if volumes, pricing or scope change?

So one -- this customer is from the U.S., and we have been basically working with them since the very beginning of our company, and...

They are a distributor. They are just a distributor. And the distributor sales to many resellers and many resellers are selling to many, many customers.

Next question from Graham again. Second half margins jumped. How much was mix versus pricing? And how sustainable is the uplift?

So second half is -- there are 2 reasons that margins increased. First is mix in high-end routers. And then second is because of our economies of scale in the high-volume routers. So both were causing the second half margins to increase.

Where are you winning or losing versus Cradlepoint and other competitors? And what are you seeing on discounting and deal cycles?

I think we don't see much competition from Cradlepoint. Again, this is a very long tail market. The market is pretty big. Yes. So we actually don't encounter with Cradlepoint that often. So that's why we even can't recall the last time we encounter a competition with Cradlepoint, that was probably early in the year in Australia, and we won that. And I wasn't aware of any opportunity that we have lost to them. No. Recently, I just -- okay, this was not last year. But recently, we won a major -- pretty major deal in Europe. Yes. So yes, we won over Cradlepoint recently. It's a pretty major European infrastructure project.

Subscription take-up rate rose to 38.6%. What are the renewal and churn rates? And what is the next lever to push attachment higher?

So we do not provide renewal and churn rates right now. So next lever to push the take-up rate higher, I suppose we keep adding new features into our software to increase the value proposition of our subscriptions, and that's how we increase our take-up rate.

Yes, that is our goal to increase the take-up rate and at the same time to increase the content of the subscription. Yes, again, we see that there are a lot of tremendous opportunity for us to tap into the subscription products.

Last question from Graham is receivables and inventories increased. Is the timing loser term or slower collections? And what is inventory obsolescence risk?

I think receivables and inventories rose in line of our revenue. So I do not see like a sudden jump in inventory. And also in this kind of semiconductor shortage environment, I think inventory obsolescence risk is -- it should be pretty low.

Next question is from [indiscernible]. Right now, the same products are sold in U.S. and other markets. Going forward, will product development in 2 companies become independent and diverge?

Absolutely, yes. Both companies will become independent.

Next question, Kate. How will Alex and CEO split time between SpinCo and RemainCo? As Alex becomes a Nonexecutive Director of Plover Bay, does it mean he will be hands off for decision-making of North America business?

I'm still a 68% shareholder. I will watch it out very carefully. And that is also we have a 2 CEOs running on separate teams. And these CEOs who have been working together for more than 16, 17 or even 18 years or maybe even 20 years. Yes, it has been too long. I don't -- I can't remember how long we worked together.

A follow-up from Mr. Leung. The previous earnings announcement, we mentioned a collaboration with Iridium. Are there any upgrades on that?

The Iridium thing is definitely one of that. And then we are seeing that they are much more -- not much -- okay, they are starting to have more satellite providers coming to the market. We really like that. We really love to see that because the multi-constellation thing, we are ready for that, and we have products ready for that already.

Okay. Next question from Gerard Aho. Will all the shareholders be able to vote for or against the spin-off during the EGM? Or is it only for minority shareholders to vote?

It's not strictly the rules for us to do so. But yes, this is our current plan to put forward the plan for holding during the EGM. This is the current plan.

So it seems to be all the questions from the chat, and I see some raised hands. So maybe we can answer.

Congratulations for the great result. Yes. So I have a couple of questions. Maybe it's easier to ask my voice. My first question is on -- so just now someone asked about the dividend, the tax issue. But I was thinking that because right now, we are actually just only segregating 2 companies. One is the sales to U.S., the other is the sales to others. So most of the profit is actually still booked in Hong Kong, if I'm not mistaken. It's only that the sales happen to be selling to U.S. but then the company that sells to U.S. is still based in Hong Kong. So in that case, the dividend tax and all that should still be like following the Hong Kong tax rules. Is this understanding correct?

Yes, I believe so. I mean if you are in Hong Kong, and when you buy U.S. stocks now, you're not on the hook for U.S. tax, right? So I think this will be the same for our U.S. company.

Okay. Yes. And then just going back to the business. So I want to know like -- so with everyone talking about like adoption of AI. And just now Alex just briefly mentioned AI can help a lot. Can you give us a little bit more details like how AI is changing the way Plover Bay works or how it is adding value to your products and what new functions that you can foresee that would bring enormous value to our customers by adopting AI to our products.

Sure. So when we look into this, we can look into that from 2 perspective. One is internally, how do we use AI to help product development? How do we use AI to make our operations even more efficient? Or how can we use AI to support our customers better. So on the internal side, we are doing all these things in various fronts.

And then on the product side, we are seeing the opportunity to apply AI to predict the WAN connectivity in various locations. So for example, maybe when your boat is cruising in a certain area, so is that area is the best to use a satellite or 5G or things like that. So we will have some capability in doing that. And at the same time is when somebody is going to deploy like 1,000 Peplink products -- our products to the branches. So okay, this can be in Malaysia or this can be in U.S.A. And then when people start to deploy these 1,000 devices into these different remote locations. So do they really need to use -- do they really need to do a site survey? Hopefully not because then we could apply the AI to predict the connectivity and how it looks like. So that is the thing that we are working on.

Okay. And then next question is on verticals. So I just wonder like -- so we have been growing around 10% to 15% consistently. I just wonder do we foresee there's any new potential verticals that could potentially become a very meaningful market to us like I don't know whether there's any new market that you're aware of or you already...

I think it's because we operate in a very long tail market. But I can say -- so if we look into putting multiple Starlink or multiple satellite connections together with multiple 5G connections. Then this is creating definitely a new market because this can become with the new fiber backup for logistics companies. This can be come with rapid deployment for many different applications. So I would say that is the most exciting market that we are looking into. But then so you can say is who are the customers of this technology. It can be a logistics company. It can be a cruise boat company or it can be a data center or it can be a hospital. It can be a government entity. So yes, I would say the demand, the need for reliable connectivity is just very robust and strong.

Yes, I totally agree. And I believe that like in every vertical you are seeing, they must be all growing. But I just wonder like in the past 6 to 12 months, are you aware of any new verticals that could potentially be a very meaningful verticals?

We don't judge. We just focus on the product and let the market tells us who are using it.

Okay. And then the next question is on the Peplink conference in the U.S. I think it's in November or last November. I just wonder like whether that you have any key takeaways from that conference? Like any changes in your mindset in your business in the way you look at the business after you attend that conference?

Sure, sure. Now it's just way more people than -- there are way more people than the past. And at the same time, people really spend a couple of days there for exchanging ideas and having trainings because we have built a pretty interesting community. And the community is the customers are very willing to share their deployments and share how they use the products with others. So the interaction is very good in these events.

Okay. And sorry, my last question is back to the spin-off issue. So can I -- I mean, I know everything has not been decided yet. But can I say like the biggest changes that the company would see as a whole? I mean, let's assume I still continue to own the 2 companies. Is it only that there will be like 2 teams that one would be very specialized in taping the U.S. market in like selling to the U.S. market and the other team is more on like the remaining market. But then in the R&D side, in the production side, can I say that like there won't be like a material changes or even your headquarter, I would assume that like it will still be in Lai Chi Kok it like that? Or like what would -- I mean, besides sales, what will be the major differences after the spin-off?

Okay. Our goal is to dominate the market where we see we should be the de facto standard. So that is the goal. And then the rest are just tactical execution details. So yes, and we never want to chase for shiny offers because that might be able to attract talent. We never believe things like that. So -- and I think the team is not going to change substantially because of anything like this.

Thank you, Steven. Let's take the last question for tonight. So a follow-up from Jonathan Tan. He said with regards to margins for each entity, will it resemble current existing segment margins?

And the answer should be, yes.

Okay. So that's all of the questions for tonight. And thank you very much for jumping into the call tonight, and we'll see you soon in the -- hopefully, in the EGM.

Thank you, everyone.