Stock code: Industrial SD-WAN: Present & Future September 2017

Transcription

1 Stock code: 1523 Industrial SD-WAN: Present & Future September 2017

2 Disclaimer The information contained in this presentation is intended solely for your personal reference. Such information is subject to change without notice, its accuracy is not guaranteed and it may not contain all material information concerning Plover Bay Technologies Limited (the Company ). The Company makes no representation regarding, and assumes no responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information contained herein. In addition, the information contains projections and forward-looking statements that may reflect the Company s current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over time. No assurance can be given that future events will occur, that projections will be achieved, or that the Company s assumptions are correct. It is not the intention to provide, and you may not rely on this presentation as providing, a complete or comprehensive analysis of the Company's financial or trading position or prospects. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities or financial instruments or to provide any investment service or investment advice, and no part of it shall form the basis of or be relied upon in connection with any contract, commitment or investment decision in relation thereto. 1

3 Who We Are A networking company specialized in mission-critical Industrial and IoT solutions Products ecosystem from device software, purpose-built hardware to cloud platform SpeedFusion combines multiple mobile connections to form an unbreakable, highbandwidth data pipe, enabling many new mobility applications that have not existed before High operating margins from strong R&D focus and asset-light structure Solid, diversified customers including global internet companies 2

4 SD-WAN Market Landscape Software-Defined WAN Industrial Networks (our focus) Long tail, small verticals Little competition Fast growing Use cases unique to verticals Deployed in rugged environments Industrial Internet combined with IoT is larger than today s internet LTE and low power WAN technologies will propel the growth of Industrial SD-WAN Small verticals and diverse use cases mean fast moving teams have an advantage over well funded established players Enterprise Networks Largest market size Highly competitive Homogenous network infrastructure Similar use cases across different users Deployed in largely similar environments SpeedFusion SD-WAN is more than just a policy based SD-WAN SpeedFusion is also a game changer in Enterprise SD-WAN: Hot Failover WAN Smoothing Bandwidth Bonding Today s niche is tomorrow s mainstream! 3

5 How The Networking World Is Evolving Connectivity Options Fixed line network MPLS Broadband / Fiber / DSL Edge network End users Consumer Router Home networks Enterprise Router SD-WAN Router Enterprise SD-WAN Router Enterprise HQ and Branch Networks Rapidly deployed Enterprise HQ Branch 1 Branch 2.. Branch..X Industrial Router Transport Maritime Public / private cloud Specialized SD-WAN Router Industrial Long Tail Verticals Public safety Construction Drivers of SD-WAN No. of remote connected devices + Mobility requirement + Data usage & bandwidth = Overall network cost IT budget Plover Bay SD-WAN routers: Ruggedized form factors Cloud device management Rapid deployment Bandwidth bonding Unbreakable connectivity Network cost savings Emerging Vertical Markets Retail Stores Internet of Things Broadcast Connected Vehicles Events Drones Digital Signage 4

6 Future of SD-WAN SD-WAN reaching an inflection point, just like Wi-Fi 15 years ago Technology Adoption We are here Wi-Fi (blue line) adoption close to 100% since its introduction in late-1990s. We expect SD-WAN to follow a similar adoption path Innovators Early adopters Early majority Late majority Laggards Time Industry growth accelerates Industry growth slows down What the market says: 50% of WAN edge infrastructure to be based on SD-WAN by (Nov 2016) SD-WAN market estimated to grow from US$740M in 2016 to USD9,066M by 2021, at an expected CAGR of 65% - (April 2017) SD-WAN infrastructure and services revenue will see a 70% CAGR, reaching USD8bn by (Jul 2017) 5

7 Use Case of SD-WAN 6

8 Public Safety / First Responders Government Enforcement Agencies SpeedFusion enables real time HD video surveillance and communications from mobile branches, such as police vehicles Rapid Deployable with high bandwidth ideal for security deployment for public events Seamless transition between government and public mobile networks 7

9 Public Safety / First Responders More Bandwidth for New Applications Traditionally, 2-way radios were the main form of communications for first responders. With SpeedFusion, the 2-way radio line can be supplemented by LTE connections, adding more bandwidth to the network. This extra bandwidth gives first responders access to more crucial information at their fingertips such as video streams, operation manuals, and site information. 8

10 Public Safety / First Responders Partnership with CUBIC DTECH LABS The M3-SE product family from CUBIC DTECH LABS is the ultimate power house in small, secure, man portable communications systems. It is designed to support additional stackable modules. The M3-SE Wireless Modules is licensed by Pepwave to provide 256-bit AES Encrypted SpeedFusion VPN Bonding. M3-SE Wireless Modules 9

11 Rapid Deployable Connectivity using SpeedFusion SD-WAN 10

12 Rapid Deployment Construction sites Worksites require stable network for IP camera, employee attendance system and VPN link with head office SpeedFusion bonds multiple LTE connections to create unbreakable and highbandwidth network for site engineers Time and cost savings: Deployment within hours, compared to months and the substantial connection fees needed to lay down a fixed line 11

13 Rapid Deployment Extending the Reach of TETRA, NXDN, and DMR 2-Way Radios Enabling Multisite IP Deployments Previously, 2-way radios only worked with other radios that were connected to the same repeater. By forming SpeedFusion tunnels between headquarters and each remote site, they become a single network. This enables 2-way radios to communicate with other sites and headquarters as if they were connected to the same repeater. 12

14 Transport Passenger buses and trains Multiple LTE connections for reliable guest Wi-Fi enhances customer satisfaction InControl 2 provides remote fleet tracking and management Provides local content and integrated web server on our Mobile SD-WAN Router Host your own PHP, Python and Docker-based web apps on our Mobile SD-WAN Router Employee shuttle services for Silicon Valley giants Multiple LTE connections provides high-bandwidth and unbreakable connectivity Mobile office experience on the move through VPN with headquarter Greatly enhances productivity as staff can work on hour-long commutes 13

15 Maritime Oceangoing vessels When the vessel is at shore, it will be connected to point-to-point Wi-Fi. When this becomes unavailable, it will fail-over to cellular network connections provided by the MAX HD2 IP67. Once it leaves shore coverage, cellular networks will take over until they are out of reach of the cellular towers. At which point, VSAT takes over, with the Iridium satellite phone as an additional failover option. 14

16 Maritime Luxury yachts Multiple-LTE connection along the shores allows connectivity for productivity and entertainment on yachts Vastly cheaper and much lower latency compared to satellite connection Pepwave is becoming a standard option among reputed yacht builders Passenger cruise and ships Multiple-LTE connections for reliable guest Wi-Fi enhances customer satisfaction Connected applications such as POS, Ticketing, and Tracking, now run more efficiently, saving time, money and frustration 15

17 Maritime Bypassing Internet Geo-Restrictions with SpeedFusion SD-WAN 16

18 Broadcasting Live HD Broadcasting Live streaming of HD quality through multiple LTE connections Cheaper and faster than satellite WAN Smoothing reduces packet loss to ensure smooth streaming Working with JVC Kenwood to develop next-gen smart camcorders Event Deployment in hours anywhere, including outdoor events with no fixed line access 17

19 Unmanned Systems Automatic Teller Machines Multiple cellular connection ensures 100% uptime in remote locations Digital Signage Flexible sign locations with LTE connectivity Remote signage content management via InControl 2 Location tracking and troubleshooting from a central location Connected Cars and Autonomous Driving Unbreakable Connectivity is well-positioned for vehicle-to-vehicle communications, which will play a crucial role in autonomous driving 18

20 Enterprise Ultra-high Bandwidth on-demand and Disaster Recovery for Offices & branch networks Multi-LTE SpeedFusion SD-WAN enables true Fixed Mobile Convergence for Enterprise networks New 8-slot based APX platform (Advanced Performance SD-WAN) available in Q4,

21 SpeedFusion Hot Failover for Unbreakable VPN This video demonstrates the difference between a SpeedFusion Hot Failover and standard failover Standard failover routers do NOT have session persistence in the event of a failover. While failover times can be improved by changing settings on these routers, nothing will change the fact that https traffic on the failed WAN will drop and have to be reconnected on the backup connection. For many applications, this means a failover will leave you disconnected. For example, processing a credit card payment, a login to online banking, a VoIP call. The session is built over the primary WAN and when that WAN fails, you will have to re authenticate on the second WAN. You would be taken back to the login screen for or banking, have to process the card again, make a new phone call, etc. SpeedFusion Hot Failover: 20

22 SpeedFusion SD-WAN enabled VoIP Typical failover routers will leave you disconnected in the event of a primary connection failure, while SpeedFusion provides an always on unbreakable connection. We are not showing the router used in the first half of the video. The purpose of the video is not to single out another manufacturer as this applies to ALL non SpeedFusion routers, rather this video is meant to educate people on the difference between standard failover and SpeedFusion bonding. SpeedFusion SD-WAN enabled VoIP: Courtesy of Peplink/Pepwave authorized reseller 3GStore 21

23 Retail Retail branches SpeedFusion Hot Failover for Unbreakable VPN and VoIP connections Not tied down by fixed line contracts when stores relocate InControl 2 allows centralized SD-WAN management across all branches Costco Mexico, Two major realty agencies in Hong Kong, Go-to-market partnership with cellular operators. Pop-up stores Store location no longer restricted by availability of physical WAN/LAN ports Secure and stable LTE connections for POS terminals in temporary pop-up stores 22

24 Company Financials 23

25 1H17 Result Highlights 6 months ended Jun 30 (USDm) YoY Change Revenue % Gross profit % Operating income % Net profit % Non-GAAP net profit¹ % Basic EPS (US cents)² % Non-GAAP EPS (US cents)² % Dividend per share (HK cents) % Non-GAAP net profit excludes listing expenses of US$544k/US$537k in 1H15/1H16 and share option expenses of US$438k in 1H17 Pursuant to our IPO, share count used in GAAP and Non-GAAP basic EPS calculations were 1H15: 750 million / 1H16: 750 million / 1H17: 1,000 million 24

26 Solid Balance Sheet and Cash Flow Key ratio 1H H17 Current ratio (times) Cash & deposit total debt (USDm) Operating cash flow (USDm) Capex (USDm) Days of trade receivables Days of inventory turnover Days of trade payable ROE (%) Capex was mainly spent on acquiring office units as R&D center, in line with IPO use of proceeds Inventory mainly consist of components for SD-WAN routers ROE = Net profit during the period / average of opening & ending balance of equity x 2 25

27 Revenue Breakdown Revenue by product (USDm) Revenue by region % +12% % 18% 4% 17% 21% 55% 47% 47% 35% 28% 23% 3% 23% 31% 43% 4% 20% 26% 50% 7% 22% 22% 49% 1H15 Total 1H16 1H17 Software licenses Warranty & support services Wireless SDWAN routers Wired SDWAN routers Key revenue drivers in 1H17: 1H15 1H16 1H17 North America EMEA Asia Others Broad-based revenue growth driven by increasing awareness of SD-WAN technology Wireless SD-WAN routers saw robust growth from expanding applications that require rapidlydeployed high-speed Internet 26

28 Gross Profit & Margin Gross profit and breakdown (USDm) % % % % 23% 26% 28% 27% 40% 41% Segment gross margin 69.0% 65.4% 66.1% 65.8% 60.6% 55.4% 53.0% 68.6% 61.4% 66.0% 59.0% 80.0% 75.0% Wired SDWAN 70.0% 65.0% 60.0% 55.0% Company blended 50.0% 31% 38% 38% 41% 33% 27% 30% 26% 1H15 2H15 1H16 2H16 1H17 Wired SDWAN routers Wireless SDWAN routers Warranty & support services Software licenses Gross margin stayed within historical range 1H17 GPM lowered to 59% from 63% in 2016 We shipped new single-wan wireless models (eg. MAX BR1 Mini) with relatively lower margin to drive adoption. We believe this opens up new market opportunities in the future High-end SD-WAN routers remain highly profitable 35.7% 45.2% 47.0% 44.1% 1H15 2H15 1H16 2H16 1H % 40.0% Wireless SDWAN 35.0% 30.0% 27

29 Operating Expenses 6 months ended Jun USDm % of sales 2016 USDm % of sales 2017 USDm % of sales Selling & Distribution % % % Admin expenses % % % R&D % % % Total Opex % % % Other income % % % Operating income % % % Opex to sales remained at 33% level R&D expenses increased 62% YoY due to higher R&D staff count, increased average salary and increased components and parts incurred for new product development Admin expenses increased 47% YoY due to increases in average staff salary and legal & professional fees. 28

30 Appendix: Income Statement Income statement Year ended Dec-31 (US$'000) H16 2H16 1H17 Revenue 17,946 21,860 28,358 12,033 16,325 17,788 Cost of sales -6,910-9,166-10,413-4,110-6,303-7,286 Gross profit 11,036 12,693 17,945 7,923 10,022 10,502 Other income Selling and distribution exp. -1,035-1,003-1, , Administrative expenses -2,049-2,710-3,412-1,344-2,068-1,974 R&D expenses -3,969-3,907-4,990-2,015-2,975-3,268 Operating profit 4,289 5,142 7,950 3,981 3,969 4,992 Listing expenses 0-1,001-1, Finance cost Profit before taxation 4,285 4,140 6,675 3,430 3,245 4,981 Income tax expenses , Profit for the period 3,743 3,357 5,240 2,801 2,439 4,135 Non-GAAP adjustments: + Listing expenses 0 1,001 1, Stock option expenses Non-GAAP Earnings 3,743 4,358 6,900 3,338 3,154 4,573 Segment breakdown Year ended Dec-31 (US$'000) H16 2H16 1H17 Segment revenue Wired SD-WAN routers 7,493 6,987 7,687 3,273 4,414 4,067 Wireless SD-WAN routers 7,635 10,685 14,291 5,685 8,606 9,832 Warranty and support services 2,580 3,905 5,189 2,536 2,653 3,114 Software licenses , Segment gross margin Wired SD-WAN routers 69.8% 67.1% 67.5% 66.1% 68.6% 66.0% Wireless SD-WAN routers 44.7% 40.7% 49.4% 53.0% 47.0% 44.1% Warranty and support services 83.7% 86.4% 86.9% 87.0% 86.8% 87.0% Software licenses 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Geographic revenue breakdown North America 41.9% 42.0% 48.8% 42.6% 49.6% 49.3% Asia Pacific 25.3% 21.4% 20.3% 23.7% 19.5% 21.9% EMEA 27.2% 33.6% 24.5% 31.1% 26.2% 21.6% Other 5.6% 3.0% 6.4% 2.7% 4.6% 7.2% Per share data (US cents): Basic EPS Non-GAAP EPS Dividend per share Basic weighted avg. shares ,000 29

31 Appendix: Balance Sheet & Cash Flow Balance Sheet Year ended Dec-31 (US$'000) H17 Property, plant & equipment ,941 Deposits for acquiring property Intangible assets Total non-current assets ,183 2,372 Inventories 3,651 4,138 6,678 8,970 Trade and other receivables 3,328 3,857 5,315 6,331 Pledged bank deposit Bank balances and cash 3,696 6,062 19,193 17,296 Others Total current assets 11,491 14,516 31,315 32,597 Trade and other payables 1,983 1,045 1,884 1,100 Deferred revenue 1,768 2,852 3,551 3,921 Tax liabilities ,589 1,595 Bank borrowings 60 1, Others 154 1, Total current liabilities 4,464 7,460 7,342 7,306 Deferred tax liabilities Deferred revenue ,008 Bank borrowings Total non-current liabilities 1, ,467 Statement of Cash Flows Year ended Dec-31 (US$'000) Cash generated from operations 3,451 3,797 4,766 Income tax paid Net cash from operating activities 3,093 3,019 4,420 Additions to intangible assets Purchase of property, plant and equipment Deposits paid for acquisition of property Change in pledged bank deposit Interest received Others Net cash used in investing activities Dividends paid -3,701-2,800-3,228 Interest paid New bank loan raised 0 1, Repayment of bank borrowings 0 0-1,238 Proceeds from issue of new shares ,701 Others 66 1, Net cash from financing activities -3, ,654 Net increase in cash & cash equivalents ,306 13,137 Cash at the beginning of the year 4,133 3,696 6,062 Effect of foreign exchange rate changes Cash at the end of the year 3,696 6,062 19,193 Share capital 0 0 1,288 1,288 Reserves 6,596 7,113 22,958 24,908 Equity to owners of the Company 6,596 7,113 24,246 26,196 30

32 Investor Relations Contact Phone: Q&A