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. 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 $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 $0.025 per share. 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 Connectivity segment increased to $40.3 million, up 9% year-on-year. Overall, the increase in both segments was attributable to strong growth from the purchases from MSP partners. 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 two 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, non-recurring revenues grew 16% year-on-year. Meanwhile, the number of devices with a subscription increased by 26% year-on-year from a year ago. The take-up rate further increased to 41.4% compared to 38.6% from six 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 multi-year 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 remained 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.
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. 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 said previously, we will do our best to 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. On the first half, we are particularly excited about two important things that is happening around Plover Bay. We are working very closely with Starlink. There is the multi-Starlink solution that we have been pushing has been very well received in the market. 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. The Starlink thing is very exciting. As well, we are working on a number of new products, including some new products that is related to the DTC market. It is directly using mobile technology to connect to the satellite. We also have other things that is happening that is exciting. That is the physical AI.
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. 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. I want to emphasize once again is, we serve a very long-tailed market. We do not rely on one particular market because we make connectivity reliable, and this reliable connectivity is actually needed by almost all industries. I think we can take questions now.
Sure. Feel free to raise hands or type your questions in. First question is from Warren Yang.
Thanks, Chris, Alex. I'm just curious of what you call the mobile segment is going to and that disappointed you.
Hi. Sorry, Warren, I can't hear you very well.
Can you hear me now?
Yes.
Yeah. 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. Thank you.
Yeah. Warren, can you repeat your question, please?
Hi, Warren. Maybe we'll move on to the next question first. From Adrian.
Hello, can you hear me?
Yes.
Hi. Well done to the team. Excellent results again. I've got two questions. The operating cash flow dropped quite a lot, to about $15 million from $22 million the previous half. I just wondered whether you could provide a bit more color into that. 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. Thank you.
Sure.
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? Inventories increased a lot, as well as, to a lesser extent, our trade receivables. I think that's a normal course of business.
Okay. Yeah, let me add a little bit on that. Basically, yes, we are stocking up a lot of memory and cellular modules and the needed components to build products. At the same time is, these products have a very long life cycle. First of all, again is, we are not in the consumer business. We are not in that space. Then is also, 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. 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. You will see is that these inventory are turning into products and turning into revenue and turning into profits.
Yeah, we are not too concerned about that cash flow issue. Then, regarding your second question about the Starlink router, we do not compete on the consumer space. We do not address the consumer market. We are mostly on enterprise market. Now with the enterprise market, the product requirements are very different. 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. Thank you very much. Just one 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 de-merger?
Actually, we are very open in looking into different ways to increase the shareholders' value. I think, yeah, 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. Yeah, I agree with you. When there's another moment like that, we should seriously look into the share buybacks.
Thanks very much.
Thanks.
Maybe, Warren, would you like to try again?
Sure. Can you hear me now?
Oh, yeah. Very well. Yeah.
Yeah. Congrats on the great result, 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. Yeah, 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. 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. Is when people are using that in the boat or in the train, that's a mobile deployment. 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 . That's why I think maybe you can look into the hardware devices as one bucket.
Sure. That's very clear. Also a question on your operating expenses. It grew much slower than revenue growth, but it's still higher than history. I'm just curious if this should be the normal rate of growth in operating expenses going forward.
Of course. We need to treat our team very well. We need to have salary increase.
Sure.
I would say actually our biggest cost is salary. We keep hiring people. The salary cost is actually the single biggest cost for our SG&A. I would say is you can assume is that SG&A will keep growing.
Understood. Just one 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. Yeah.
It's mainly project timing. The delivery schedule didn't happen in the first half. That's it.
Let me clarify that. That is EMEA, Europe, Middle East, Africa, it's not particular to Middle East. It's the whole region.
Understood. Okay. Thank you very much, congrats again.
Thanks.
We can take some questions from the chat. First is from Lucas Liu. Level two 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. Will this reduce the client's need for the company's expertise in L2 bridging?
Oh, no. Not really. Not really at all. I think is what people look. The fundamental value that people look into our products is to make it more reliable. It's the multi-WAN capability is actually more important. The bonding capability is more important. Is that with all these SASE architecture, zero 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. 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?
We have a very strong ecosystem, and our ecosystems is including as a MSP, distributors, and resellers. Our partners are super important to us. 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. At the same time is, we keep rolling out new products, new technology and solutions with our channel partners to address the market need. We are very open in working with everybody in the industry. Actually, we have some really exciting partnership that's going on. We're not going to name these names here. I would say is, in general is, our technology is being recognized as the market leading technology. As always, we have a lot of partners, they treasure and value our technology and wants to work together.
At the same time, we respect their knowledge in the vertical market as well as the market presence. We would love to partner with all these partners.
Okay. Next question comes from [Musasa Capital]. 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. This is our fundamental business, and this is what we should focus on right now. 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.
Are there any updates in the robotics vertical?
Oh, yes. Robotics is very exciting. 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. All these robots, 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. Yeah, these people, they see mission critical connectivity is important, and that is exactly the market that we do very well. 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 [Musasa 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. We are seeing the project is still going smoothly. What I would add is, 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. When times come where we have a concrete timeline that we can provide, we will definitely be sharing with you all.
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. We are working on a number of new generation of products. 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. That is our goal.
Again from Gerard Ho. Beyond Australia and Japan, have you opened new countries recently?
Not really. Yeah, not really. Actually, maybe I can share our philosophy with everyone. We always look for quality instead of quantity. We want to be the market leader, or we want to be the most lovable product in the space that we work with. Australia and Japan, actually these two countries are not our new market. We have been working in these markets for more than six years. I would just say is, just like most of our business, we grow organically. Growing organically takes time. We see is that this approach is actually doing very well for the company, and it is way more sustainable and more robust. We are going to continue with this, and that's why we said we are not really rushing into entering new markets.
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. In terms of geographics, we are 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. Yeah. We'll continue to work on this approach.
Next question from Andy Chan. Can we provide more colors on the increase of receivables? 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%. 58%, is this a sustainable level to keep going, or do we expect to keep going up? 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, traditionally, it's our higher-end models have a higher margin. Actually, it's a much higher margin than the entry-level products. 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. These things are making a bigger impact on our gross margin than the memory price. I would say this is more like a product mix. 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. I think it's your spin-off timing.
Cherry just shared the status with everyone.
The latest percentage of 5G products. In terms of sales, 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. It has not reflected yet because the effective date is on 1st of July.
From Jonathan Wong. Does the Middle East conflict 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. Do we still target a 50%-60% take-up rate as our long-term goal?
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. I hope I can share some of our new product roadmap with you right now, but I couldn't. Yes, you're right. We are seeing is our customers are deploying more and more edge AI applications. We'll have a product series to address that.
Okay. From Adrian Cheng again. Any news on who will be the CEO of the retained group? Is it a promotion from within or external?
Oh, absolutely. Actually, we have identified the person, and the person has been with us since day one. 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, five years? How big can this vertical be?
Right. I think a lot of new technologies are very exciting. 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. We all know this is not talking about a consumer space. This is talking about a construction site, or this is talking about the dangerous or hard-to-reach areas. We are very optimistic about that market because in that application, it demands reliable connectivity, super reliable connectivity. 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 have been moving into mobile.
Oh, no. We don't worry about that because I think, again, fundamentally is we are a multi-WAN company. We just love multiple connections. 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. 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. We are not concerned about that.
From Gerard. Will we keep the same payout ratio for the new U.S. list co?
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. Our approach is always is to distribute the excessive cash that we don't need back to the shareholders.
From Jonathan again. 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?
Actually, it all depends. 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. Yeah. 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. With all these subscription, it generates pretty good cash. 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.
A follow-up question. I think this is in relation to the competition with Starlink. Steve Wang asked about the competition from Digi International or Cradlepoint.
We have been working for 20 years, these guys are also in the industry as long as we do. We know each other, we grow together. We all live in the same planet. We don't see we are killing each other. It looks like everybody's doing a good job.
From Brian Cheung. Do you mind sharing Peplink position in direct-to-cell?
Yes, absolutely. This is actually very exciting. 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. When there's situations like that, people will start to say, 'Hey, can I have a faster speed? Can I have a more reliable connection?' In that case, they will need a product from us to bond these multiple cellular connections together. I think this is just expanding the market that we have. Actually, we are also working on some interesting products that I'm very excited. The direct-to-cell is another technology we'll benefit from.
I don't see any new questions from the chat or from our other participants. Thanks everyone for dialing into the call. We thanks for your support I think Okay.
Yeah.
we'll end the call now.
Yeah. Thank you, everyone.