Pax global 1H 2020 transcript

Company Name: PAX Global
Company Ticker: 327 HK
Date: 2020-08-14
Event Description: S1 2020 Earnings Call
Market Cap: 4923.60505
Current PX: 4.55
YTD Change($): 0.9
YTD Change(%): 24.658
Bloomberg Estimates - EPS
Current Quarter:
Current Year: 0.645
Bloomberg Estimates - Sales
Current Quarter:
Current Year: 5173.5
Page 1 of 13
S1 2020 Earnings Call
Company Participants
• Calvin Pei, Assistant Vice President, Corporate Strategy and Finance
• Ethan Cheung Shi Yeung, Chief Financial Officer
• Nie Guoming, Chairman and Executive Director
Other Participants
• Unidentified Participant
• Gabriel Castro, Analyst
• John Cummings, Analyst
Presentation
Calvin Pei, Assistant Vice President, Corporate Strategy and Finance
Good evening, ladies and gentlemen, thank you for standing by. Welcome to PAX Global Technology 2020 Interim
Results Conference Call. I'm your host today, Calvin. Also responsible for Investor Relation at PAX. Joining me on the
call today, are our Chairman, Mr. Tiger Nie; and our Chief Financial Officer, Mr. Ethan Cheung.
In order to maintain the Groups high transparency, we are using webcast to meet with investors and shareholders and
share some financial highlights and insights about the Company and industry. If there are any technical issues occur
during this call, please use the dial-in numbers provided on the registration, confirm the email, to continue joining the
conference.
Now, you can see our presentation on the screen. The Company also posted the presentation to go along with this call.
All materials can be found at our website on the Investor Relations section. All participants will be in a listen-only
mode during the Company's presentation. Throughout this conference call, the Company will be sharing financial
highlights and targets. After the financial targets, there will be a question and answer section. (Operator Instructions).
Before proceeding, let me mention that any forward-looking statements included in the presentation or mentioned on
this call, are based on current available information, assumptions, expectations and projections about future events.
You are cautious not to pay undue reliance on these forward-looking statements. Actual results could differ materially
from those contemplated by our forward-looking statements. Reported results should not be considered as an indication
of future performance. So now, please turn to Page 3 of the presentation. It is the agenda of this call today.
Now, may I invite our CFO, Ethan, to share our interim financial highlights, recent updates and financial targets in
2020. Thank you.
Ethan Cheung Shi Yeung, Chief Financial Officer
Thank you, Calvin. And thank you once again for attending the video conference today. And also thank you for your
continuous support to PAX. COVID-19 is not yet under control here. We sincerely hope that you and your family are
staying safe and healthy.
Let's begin with the presentation. Snapshot of our interim results, you can see on the screen here. Well, PAX has
maintained a very good momentum in 2020. Our global network, our products and our financial, remains very strong

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 2 of 13
under the COVID-19 situation. The uncertainty of global economy still exists. However, we are confident that in our
prospect of our future -- prospect of our business. In the first half of 2020, our topline increased by 7.4%, once again,
this is driven by our overseas business. GP margin increased significantly by 3% compared to last interim period, from
38.6% to 41.6% this interim. This is mainly due to two important factors. First of all, our Android products, our
Android products has generally a higher profit margin and this interim, the sales proportion of our Android also
increased. Second factor, is a positive impact from the renminbi depreciation to our business. Operating profit margin
maintained at 17.2% this interim period. Then lastly, the profit, the profit has a very impressive growth of 18% and
reached the level of HKD384 million this interim period.
Well, the first half of 2020 proved that, the role our industry plays in the world today, is more important than ever.
Secondly, there are few one-off expenses recognized during our interim. As you may have noticed in our interim
financial information. First of all, the share option expenses, same as what we presented to you earlier in March, under
the 2019 share option scheme, all the share option expenses, will amortize in 2019, '20 and '21.
Second, the one-off portion of the impairment of our receivable, this impairment amounts relates to customer in APAC
and US regions. Less than HKD10 million of these provisions is related to Wirecard. In APAC region only, we do
business with Wirecard, meanwhile we understand you know -- in the last few months we understand from Wirecard,
their operation in Southeast Asia continue as usual, even up till now. However, having (inaudible) that, couple of
months ago, their German headquarters already filed an insolvency proceedings. That's why on a prudent basis, we
made provision for order and uncollected receivable up to July. The amount is less than HKD10 million.
Thirdly, goodwill impairment. Give you some background here, we have two subsidiaries in Italy. One is for payment
terminal business and one is for the payment services. The performance have been quite different, payment terminal
business performance has been very strong. And while the surface business experienced a big uncertainty in 2020 and
hence, we made goodwill impairment for this particular surface business segment in Italy. Next Slide is about our
corporate actions. Well, back in the time in March, in our last Analyst Briefing we said that, PAX would focus more on
unlocking the shareholder value. Here, I want to report to you our key operation, key corporate actions in the first half
of 2020.
First of all, dividend. We proposed to declare HKD0.07 per ordinary share. It represents an increase of 75%, compared
to last interim period. First six months of 2020, we completed share repurchase, 8 times. Total, we repurchased 17
million shares. Going forward, in the second half of 2020, we will continue to conduct capital actions as appropriate,
and focus more on creating greater returns to our valuable shareholders.
This Slide, I want to share about COVID-19. While these days when I met some media, where the media often ask one
question. You know, the COVID-19 the world obviously has a lot of changes. But, which of those changes will be
permanent? It is a million dollar question. I personally believe that the cashless society is definitely one of the
irreversible changes. Recently, what we saw in the market. First of all, the consumer behavior had a radical change.
World Health Organization said to the public, the use of cash might spread the virus. And since March, more than 20
European countries have increased the limit for contact-less payment, including UK, Germany and France.
Second thing we noticed, the governments, basically every government or most of the governments in the world, are
encouraging the use of in-store electronic payments, is basically drive up the demand, the future the demand of
payment terminals. According to recent reports of Visa and Master, during the COVID-19 situation, the use of
contact-less payments increased dramatically. Well, today, we have another -- as you may know, we have another
investor briefing conducted in Mandarin this afternoon, and most of the investors and shareholders asked one question,
that is, how PAX could maintain the business and get a good result in this interim, under COVID-19. I want to take this
opportunity to share with you three reasons. First of all, the customer satisfaction, customer side, well we have
experienced some shipment delay due to the lockdown of some cities, no surprise here. And once when the cities
reopened, we delivered the shipment in a very, very quick manner and most of our customers were impressed. As you
know, most of our -- most of our global partners and clients have more than five years relationship with PAX. What we
found now, we have even more in-depth mutual understanding between us, under COVID-19 situation.

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 3 of 13
Second, the supply side. During the first half of 2020, some of our suppliers and contractors in China encountered
different degrees of difficulties. What we did is, we actively offered help to them, thanks to our strong financial and
cash flow. What we did, for example, like for certain suppliers, long relationship suppliers, we settled the payment
earlier and in some cases even paid more deposits to our suppliers. These initiative directly supports their cash flows
and help them to get through the very difficult times in the first half of the year.
What we found now, our relationship with suppliers and contractors is much stronger. Since most of their production
resumed the full capacity in July and August times already, we are very confident that we are in a better position to
compete with our overseas peers. While the quick delivery -- the quick turn over as I mentioned just now, is a perfect
example.
Lastly, but not least, about what we did internally. Well, the management team including myself, usually we always
travel around the world and we think, this but because of COVID-19 -- have been -- we can just stay home or stay at
office. We took this opportunity to do more internal trainings and sharings. And we also discussed and consolidate a
way of how we manage our R&D, our couriers and suppliers through virtual performs in the future. This is a very good
opportunity for us to build up our strong and the future strategy in -- under COVID-19 situation.
The next Slide, I want to give you an update or maybe a performance summary of our Android solutions. In the first
half of 2020, Android products have become -- already became an important growth driver for our Group revenue. It
contributes more than HKD600 million revenue and the sales proportion reached at more than 25%. As you can recall,
we rolled out our product, Android product in 2017, and since then it has been well received by the market. As you can
see in the picture here, A920, and other model A930 they are basically the best sellers. Especially in the last two years,
the penetration of our Android solutions in Europe, in States and in APAC markets has been very impressive. This is a
small success. The essence of this success, not only related to the hardware, but also the software and the apps. This
was nearly similar to what you have in your pocket, your mobile phone. Our PAXSTORE is like the app store in your
mobile phone, it is an open and cloud based system.
Nowadays, we already have a huge amount of apps available for all the merchants to use and download. Through -- of
course through our PAXSTORE platform. Hence our Android now is not solely for payment, but is a all-rounded
solution. It is ideal to the environment like IoT, Internet of Things and sell-services concepts. And to conclude, we are
very confident in the potential of our PAX Android solutions.
Well, in the coming two slides. I want to give you a summary or a quick snapshot of our performance in overseas
market during interim. While there is a growth of 7.9% of our overseas business, and then our overseas revenue already
contribute more than 90% of our Group total revenue. Let me begin with Latin America. Well, no surprise here,
COVID-19 results in certain delay in our delivery in that region. That is the reason why we record a slight decrease in
revenue.
Honestly, no one knows when the COVID-19 will end, in Brazil and in South America. We expect the uncertainty will
remain in the second half of the year. COVID-19, while again created a softer impact to PAX. However, we are very
confident, in the medium to long term prospect of Brazilian payment terminal industry. Looking ahead, we believe that
Android solutions will drive the growth in Brazil and in South America in the future.
Second region, about the EMEA region. Europe, Middle East and Africa. 17% growth in COVID-19 situation is very
impressive. While European countries have been negatively affected by COVID-19 and the market, but we can see the
market still have a strong demand in our Android. In short, PAX business in Europe can only be better in the coming
few years, when the virus thoroughly comes down. The third region, APAC region, very, very impressive growth, close
to 50% growth this interim period. India and Japan are the key drivers. India, we are doing very well with our two
major clients Paytm and Pine Labs. Meanwhile, we also cooperated more local banks and payment providers. We hope
to speed up the penetration in India in the coming few years.
In Japan, we are already deployed our products in the very famous local convenience stores and also in a global
(inaudible) Park. Driven by the acceleration of cashless infrastructure in Japan, the demand of the electronic payment
terminal is on the rise. Similar to other region, COVID-19 undoubtedly created short-term challenges. I expect the

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 4 of 13
uncertainty will remain in Q3 and Q4. It might potentially slow down our deployment and the installation process in
this region.
Next, US. America has been our very important market. In the second half 2020, we achieved a 32% strong growth.
During the period, our Android product received an award from Visa. This is another proof that our quality is well
recognized in the state. China market, 2019 we reported to you before, we adjusted our strategy and our structure in
China market. This initiative will view the positive results. We can see an improved profitability of China market in
2020, so far.
Last Slide, financial target. As mentioned, COVID-19 is not yet under control. We have adopted a conservative
approach for our revenue forecast in 2020. We keep our target of at least maintaining flattish in 2020. In terms of the
gross profit margin, I mentioned earlier, two important factors was GP, is the sales proportion of our Android solutions
and the situation of renminbi depreciation. Based on our current assessment, these two factors, remain positive. Thus,
we increased our gross profit margin target by 1%, above 40% this year. Operating profit margin target is also
increased accordingly by 1%, about 16%. This is the end of my presentation of our interim results.
I now pass the line back to Calvin.
Thank you Ethan, for sharing our interim financial highlight, recent updates and financial targets in 2020.
So, now we open the call up to questions. (Operator Instructions).
Questions And Answers
So our first question come from [ph]John Oakden. So you may proceed.
Unidentified Participant
Hi, Calvin and Ethan. Thanks for the presentation. Really good results. Just two or three for you. The first one, just on
the last point you made about the targets which -- little conservative, flattish topline, of course your topline was up 7%
in the first half I think and the profits were up in the teens, I've forgotten. So, what that suggests, your targets suggests
that, the second half of 2020 is going to be worse than the first half. So, I'm wondering, if that's really the case. Because
to be flat on your topline will mean, the topline will have to be a minus number in the second half and the same -- the
margin as well. So, if the the profit would end up flat, wouldn't it, if the topline is flat? I think the margin would be up
slightly on last year but, -- so end result is, second half would be worse than first half. So I just wanted to clarify that, if
you can?
The other point is just on the receivables. If you look at the aging analysis through receivables, the number has gone up
by about 100 million I think for receivables over six months. So I'm just wondering what that relates to, and is rather
worrying saying that we should worry about in terms of actually collecting the money?
And then the other questions relate to the provisions for inventory. Why are you making those, what's that relating to?
Because obviously you receive orders from clients and then ship goods. So, why are these goods having to be written
off? And the same relates to other provisions you're making. I think it's on receivables. So -- which relates to the other
questions. So thanks for that. And over to you.

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 5 of 13
Okay, thank you for the questions. Well I -- there are basically three parts of your question. Maybe I will take the first
question about target that we had for 2020. Again, I think I need to emphasize one point is, I think we are topping the
prudent mindset in setting our overall revenue target for this year. One reason behind this, I think everyone knows that,
COVID-19 is still a big uncertainty. I'll give you two examples. First example is, you know, in July, when we have our
-- we planned to deliver some -- our a big batch of our inventories to India. However, just three days or two days before
we make that delivery, the Indian Government, Delhi, actually had a complete lockdown for one or two weeks, I can't
remember, but even they re opened, there is a delay in our shipment because you know obviously some people, they are
staying home and the customs, the efficiency of customs, you can imagine, is not that quick.
So these kind of situation happened in -- especially in June, July. So, that's why I believe that you know the uncertainty,
especially towards installation and delivery, remains very high in Q3 and Q4. We all heard about the numbers, about
the confirmed cases in India, in the State and also, in South America. Well, unfortunately, these three countries, or
three locations that I mentioned, they are all key PAX market. So, in the short run -- in the long run I think we should
be positive in the long run when all the things, I mean the virus calms down.
But in the short term, I mean the coming few months Q3 and Q4, unevitably, you know there will be a big uncertainty.
That's why even we have the order I can't be certain that we can deliver in the second half of the year. So that's why,
again I explained myself is, we need to be prudent. We are not -- we remain positive in the future, but I think we need
to be prudent, just in the coming few months. If the virus calms down quickly, for example like September, October,
which is not likely, from the situation now. If that happens, I think we can have a better result than what we expected.
But right now we try to be conservative. I think this a good reason behind.
And second question is about receivable. Yeah -- the aging. Yes. The aging over 180 days. I think you've mentioned
this category, which is a age batch between 180 to 165 well, the short answer is, because of COVID-19. Well, we
supported to -- as I mentioned in my presentation, in China we supported certain suppliers. But however -- obviously
we can't support everyone, right? In South East Asia, there are certain customers that they want to have a -- they came
to us, they want to delay a little bit in terms of their payments. Of course, we understand that they have no issue in
terms of their operation. You know, unlike Wirecard, I think they are actually quite normal operation, but just that they
need more time. I think this is kind of like a normal situation. If you look through the annual reports of different global
listed companies, I think they all experienced the same.
At the moment, we did a very detailed analysis about the receivables. And I think at the moment, I'm not too weary
about, one of the, biggest balance in that category, over 180 days, is actually a receivable from at listed the company.
And I didn't see anything that came to my attention that, we need to write off or we need to provide extra. So, we will
wait and see what will happen in the second half, but at the moment I think we -- the provision that we make is
appropriate and sufficient.
And thirdly about the inventory, is it. There inventory provision. Yes this, well -- I mean this is no surprise here, I think
it's all because of the accounting policy that we are adopting. The most important essence for applying a accounting
policy is to keep the consistency and you can say, partly because of this consistency, and also partly because of market
situation in the first half of the year, some of the inventories in China is -- well for a certain period of time, they have
no movement. And according to our existing policy, we need to provide provision for those who are -- who have no
movement for certain period of time.
So basically, what we did is just apply the policy and then we need to provide according to what we did in prior years.
And there are no write offs. We know they can -- I will honestly think that they still have certain salable value. But just
acquiring the policy I think we need to make that decision. I hope I answered your questions.
Thanks, Ethan. (Operator Instructions). So, our next questions comes from Gabriel Castro. You may proceed.

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 6 of 13
Gabriel Castro, Analyst
Thanks, Calvin. Congratulations on your strong results and the presentation. I'm especially satisfied with your capital
allocation decision, it is pretty clear that shareholder returns are a priority in this Company.
Okay. So two questions from my side. First, how do you see the future for the sector. Do you feel there will be any
disruption due to COVID for example, I noticed, Facebook is trying to enter in Brazil, could you comment something
about that? And second, I read in your press release that PAX is actively looking for potential M&A. Which type of
companies are you looking for? (inaudible) companies like the acquisition you did in Korea, or distributors or service
company like gateway service? Thanks.
Thank you, Gabriel. And thank you for your questions. Well, in terms of the industrial trend, under COVID-19, well,
first of all I -- from my perspective, I feel like the payment terminal business will have a little bit change in terms of the
overall COVID-19 situation. You know the changes I mentioned is, people, the consumer behavior even for a small
amount transaction, they tend to use their more hygienic and cleaner approach to do, that means which is good to us.
Because the contact-less transaction will obviously become the major -- will become the major transaction method.
And this is basically speed up the demand -- the future demand of our payment terminals.
We know some countries, they used to -- use a lot of cash, and right now because of all the things happened, we can see
this trend -- well, I mean it's more like become irreversible. Before the COVID, I think we are more like sit and wait
until the people or the Government do something. But right now I think it became an irreversible trend. I'm sure in
Spain -- I'm sure in Spain and the Hong Kong I think people are still becoming more conscious about that. And this is
what the trend that I can see now.
And then for the M&A part. Thank you for asking the question about our M&A. I also want to give you an update on
that. Well, we are looking for some targets in the advanced market, for example, like in Europe and in the State. We
obviously, we are looking for opportunities that we can work together to utilize on the sales network, so that we can
unlock our synergies working together. And the top priority to us we will be -- have some software businesses or
maybe some platform businesses, that can enhance our existing levels. And this is our top priority. And you know at
the same time, if there are some distributor and --- in southern part of the world, if they are interested to work deeper, I
think we are also open to these kinds of opportunities.
Okay. So can I ask. Okay -- So regarding Facebook, I think it is not to ask the question, that Facebook is trying to enter
in Brazil. And I think also in India. Is it (inaudible) to the company?
Sorry I ask once again, you said you're talking about Facebook or couldn't catch the name.
Yeah, Facebook -- Facebook. That's..

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 7 of 13
Okay. Okay. Sorry, I couldn't catch the first place. Well, I mean Facebook, depending on what they did, I know that
they recently launched the Libra. From what I know now, I didn't feel they can successfully becoming a threat to us.
Thanks, Ethan. So, our next question is comes from, the Chat room from Investor, from (inaudible). So his question is,
what are the things that worries the management most. So in the context of mid to long-term prospects of the Company.
And the second question would be, is there any fixed policy on the price to buy back shares as decided by the Board.
So, if not, how does the management decide whether to buyback at a certain price or not?
Thank you for your question. Well, I answer the first -- second part of your question first. About share repurchase.
Well, honestly. You know, in the, in the economy like now. I mean the uncertainty remains quite high. We don't have a
very specific policy of when to do repurchase. The only thing that I would say, and I can commit is that, we will
continue to look at even more actively in the -- whenever we think is necessary and we have the financial capabilities,
we will do regular repurchase. This is what we promised to the market. But we don't really have a very specific policy
about that.
And first part of -- what are the things that worry the management most, in context on medium-term to long-term
prospect. Well, I mean this effectively means what is the biggest risk of our business. Well, I mean to me I think the
biggest risk, is not very frightening. But, you know one of the business which that we encountered, basically I can share
two. The first one is about potential entry or potential competition from Chinese local competitors. What we see now is,
some of the competitors, they can enter into some particular one or two country or region. And they will try to lower
the price, to compete with the rest of the world. And they got a little -- based on what I saw now, basically they can get
into penetrate into one or two country. But, when it come to a global context, because of the certification requirement,
because of the capabilities requirement, what we saw in the past five years, we don't think they have a -- they'd become
a big threat to us.
And the second risk to us is about -- while, I mean there is also another risk that at the moment is limit our expansion,
is the foreign exchange currency exchange -- foreign exchange rate. Well, I can tell you, in Africa and in South
America, because of currency fluctuation, especially this year is so huge -- and we are very difficult -- we are quite
difficult to find a strong partner that can accept United -- US dollar to do transaction with us.
You know, this is our -- at least -- at least on a current perspective, we don't want to bear the foreign exchange risk,
especially in countries like in Africa and South America. So foreign exchange rate risk remain a risk to us, and also a
kind of like a limit, to some extent a limitation to our business expansion.
Nie Guoming, Chairman and Executive Director
Ethan, (Foreign Language).
Let me do the translation for our Chairman. And well, Tiger. Mr. Tiger Nie would like to supplement in terms of the
medium to long-term prospects of risk of the Company.

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 8 of 13
(Foreign Language).
Well in essence, the external factors we need to take care of, but to me even more important factors is coming from our
internal side. One key factor is, whether we can have a good judgment in terms of the future trend of the market, first
one, and the second whether it comes back to our R&D, whether we can produce a good quality products to suit the
market.
Thanks Ethan and thanks Tiger. So, our next questions comes from [ph]Neeraj Mohandas. So, you may proceed.
Unidentified Participant
Yes. First of all, congratulations on these amazing results. So, I have two questions. I can understand why working
capital got a bit worsened this this year, but I would like to ask is if last year receivable turnover days is a sustainable
metric for the future. And also if you could give us some color in cash flow for the year. I guess we should be expecting
a lower EBITDA to free cash flow conversion. Thank you.
Thank you for the questions. First of all, account receivable turnover days last year. Well, I think I mentioned last year
is -- I think this is a sustainable account receivable turnover days. But it is subject to one key factor, which is about a
receivable from our Brazilian partner. Well, what we did very well in 2019 is, we basically take the control not only the
Brazilian partner, but also the customers in different parts of the world. But still, our Brazilian customer contribute
around 40% to 50% of our sales in account receivable. So, the key factor remains whether we can you know our -- we
can have a good effective control on that end.
And that also really circle back to the currency fluctuation, you know this is kind of like, if I need to comment as a high
level of account receivable turnover days last year, it did good job. But I think it is sustainable turnover rate, but is
subject to the risk of -- I mentioned earlier.
And the second part of your question, cash flow. Yeah last year the annual and new cash inflows as a total is around
HKD1 billion, which is impressive, and our cash flow depends on of course obviously the mainly two things is about
the payment that we paid, and also the receipts that we get, successfully get from our customers. And because of these
two factors, sometimes it is difficult to control exactly what could happen, especially this time of uncertainty. So, but as
a whole, I think towards the end of the year, I think we are confident to -- while we cannot -- I don't think we can make
it and other HKD1 billion cash inflow for this year, but I think we can kind of like in the average, is around 2 to 4 times
of our -- what I mean, may be around one-third of what we can achieve in the last -- in the last couple of years.
Thanks Ethan. So, our next questions comes from chat room from an investor from (inaudible). So his question is, how
does PAX intend to maintain or improve it's innovation capability, given the competition for talent in the markets, and
then the second question would be, does PAX set a certain budget for R&D or the suspend whatever amount it could
hire as good employees to work on R&D and innovation.

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 9 of 13
Okay, thank you for the question. I think maybe I can take the second part of the question, maybe Tiger if you don't
mind, maybe you can comment a bit on how we can retain our R&D capabilities. So, I answer first about the second
part of the R&D budget. Well, honestly for R&D this is basically the fundamental of the Company. As a technology
Company, having R&D is the most important element to us. And, don't get me wrong, I'm not saying that we have no
control on our R&D budget. But, just that I think we need to unfill [ph]. I think we need to make judgement whatever
we need to spend, we will spend. And as a whole, if you can look at the ratio, what we are talking about now is around
7%, I think 2019 and 2020 so far, I think it's around 7% to 8%. So, this is roughly the high level budget that we set to
ourselves. But in case we see there is chance in the future, like we need to invest, we need to get balance to build up the
PAXSTORE or Android solutions, we will just spend. But as a whole, you would expect our target to our service
around 7% to 8% to the revenue.
(Foreign Language).
The first part -- sorry, maybe I -- well, the first part of the --- to answer your question, how we preserve our innovation,
the first part of that is all -- will our customer. Customer will regularly feedback to us and they can obviously, because
they are -- all of -- they need to work on the ground. They obviously can feel that whether orders is innovative or not
and they will provide regular feedback to us.
(Foreign Language).
There are two key factors, well in relation to innovation. First of all, we've mentioned earlier, is the customer feedback.
Well, we need to remember that we have a -- well we have developed a global network for many, many years. And by
now, we can say that we have a very diversified global network. And this basically every year, these global customers,
they will provide valuable feedbacks so that we -- our engineers can take the -- can know that what happened on the
ground. This is the first important point.
The second important point is, well, our -- is about our efficiency in R&D. Well, we are in this business for many years
and our R&D team has been (inaudible) so long. And they are very quick in responding to the request of the customers,
this is related to the R&D, our culture and also our capabilities. And, if we compare to our competitors, I think we are
usually, or we are always quicker than our -- quicker to provide responses to the market and also to our customers.
Thanks, Ethan and Tiger. So. Our next question comes from Robert Andersen, is also from the chat room. His question
is, the company is holding a lot of cash. How much of that cash is needed for working capital, minus M&A, will the
rest be paid out in a special dividend or buyback over the coming years?

Date: 2020-08-14
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Okay. Thank you for the question. And I think for this is a question for how we're going to use our cash. Well, I --
obviously you know, certain part of our cash we need to retain for our cash flow for the daily operation. So, around I
would say about, why don't we hold HKD3 billion cash in our bank account. And I think around one-third, during one
or two particular peak settlement months, we need to be served around one-third of our cash to be out -- to become our
operate -- to be our operating use. And the rest of them basically we are preserving for the future M&A opportunities,
and the capital market actions, like repurchase. I think I explained that earlier about our repurchase plan.
And for dividend, maybe I think Tiger you can comment more from the director level, about our viewpoint on
dividend.
(Foreign language).
First of all, I think the market and all of you noticed that, in the past few years, the changes that we have talked in our
dividend declaration. And based on factual results, I think we are increasing more and more dividends to our
shareholders. This is something that I would say is a strategic change, that we made in the couple of -- in the last couple
of years. And but however, you know that there is so many different factors that could affect the dividend payout and
we want to retain certain feasibility, so that, at the moment, we don't have a specific policy or specific plan in doing our
dividend. Is all on a case-by-case basis.
Thanks, Tiger and thanks, Ethan. So, our next questions comes from John Cummings. You may proceed.
John Cummings, Analyst
Hi, thanks for taking the question. I just wanted to know if you could comment on how sales have trended throughout
the semester kind of as COVID got worse. I mean, did sales growth go down a lot in the last few months, so I mean I
guess, what I'm asking is, what was sales growth like in April, May and June and kind of how did it trend throughout
the semester and even into July. That would be helpful. Thanks.
Thank you for your question. And this is a difficult question. The reason why I say that is the pattern. Well, if you look
at country by country, if you look at as a whole, the variation is not that much, but if you look at country by country, I
think the example that I mentioned earlier, about India. There could be one month that we make all the delivery,
because it depends on -- of course depends on first of all, whether they have to demand, whether you have the order,
that means. Even, you have the order, but you know, certain extent, when it comes to cities, or when a country
lockdown, you can't deliver. So if we comment on the country on country across the six months, is actually February.
And even another second example that I can give is the example in Brazil, because in Brazil in June, we have our
partner in Brazil, basically their factory closed because of their request from the government they closed it for a couple
of weeks. And for that couple of weeks, we cannot, well as you can imagine, we cannot really make any meaningful
shipment to Brazil. So, these kind of things happens across different countries and it also circle back to my answer

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
Page 11 of 13
earlier, why we need to be prudent in our revenue forecast.
Honestly even we have orders on our hand, it is quite uncertain when we can deliver. Even the customer request us to
deliver, is still a question mark whether we can actually deliver. And -- even if we can deliver, the installation process
locally could have certain delay. So, these kind of like a lot of things that would affect. And in July, I think the -- the
sales among -- does not vary that much, I mean as I said, monthly total revenue does not vary too much, because in that
particular month some countries suffered, as counties will become dramatically increase. So, as a whole, the variation
across month is not that big. I hope I answered your question.
Thanks Ethan. So, our next question comes from chat room from investor, (inaudible). So, the first question would be,
who do you think is the biggest competitors of yours now? The next question would be, if PAX next year suddenly
receive an order that has a significant growth, does PAX have the manufacturing or supply capacity to deliver those
orders, or could there be any limitations to PAX revenue growth. The first question would be, has PAX thought about
where it would be in 10 to 20 years. If so, what does it look like? Thank you.
Okay, thank you for your questions. I think you know, maybe Tiger you can try to comment on the third part. Which is
about the future looks better?
(Foreign Language).
Well, I mean, our Chairman, Tiger just mentioned that he guessed, probably people would love to hear from what he
said. So maybe Tiger you can take that question.
(Foreign Language).
I thought the biggest competitor to PAX remains as Ingenico, because right now, they are still the biggest, with a
network worldwide. And this is -- this has been like that for many years, and we are still in the process to trace the
results of Ingenico and try to take over it one day.
(Foreign Language).

Date: 2020-08-14
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YTD Change($): 0.9
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Current Year: 0.645
Current Quarter:
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The second question, sorry -- maybe I do the translation first. The second question is about, if we suddenly received a
very big significant order, do we have the enough capacity to handle that.
(Foreign Language).
For this problem, you completely -- you don't need to worry at all. And we have our very strong supply chain.
Recently, we also started our own production, so combining the two factors, our production line and our very strong
subcontractors, this is not a problem at all.
(Foreign language).
If are talking about 10 years, 20 years time, which is a long perspective, so for sure our hardware will become number
one. And in terms of our software, well, it depends, because we -- it depends on how capable we can develop our
PAXSTORE and how we deploy, how we penetrate the PAXSTORE into the different parts of the world. So, there is
still a bit uncertainty here. I cannot say for 100%. But what I can say for certain, is for hardware, we will become
number 1.
Thanks, Ethan, and thanks, Tiger. So, due to the time limitation, we are going to the last questions. So it's from Gary
Dowsett is in the chat room. So his question would be, can you expand on the relationship with Hisense Technology.
So, is there any trading relationship between the companies. And the last question would be, what do you expect them
to do with the holding impacts.
Thank you for the question. And for our relationship with Hisense Technology. I think we disclosed, first of all the
shareholding, around 32% to 33% shareholding, biggest shareholder. Second, about the transactions, we did two things
with them. Well, I mean we have been like this for around 10 years, I think since we listed. There is no special changes.
First of all, we purchased certain kind of chips from their subsidiary in China and that purchase I think is not that
significant, compared to our overall purchase amount every single year.
And, then we also sell certain payment terminals to them in China market and to their subsidiary in China market and
again this amount is not big amount. I think it is around HKD100 million, which is around the cap, and then the
purchase, I think is around this interim -- again is around HKD100 million which is not a big numbers to us. And that's
all the transaction that we have with Hisense.
And secondly, about the question of what they will do. Well, honestly, I think I'm not in a good position to answer that.
But based on the facts, that we can observe, by -- since I arrived in PAX in 2016, I haven't seen anything that big in
terms of their shareholding, in PAX. That's all I can answer.

Date: 2020-08-14
Current PX: 4.55
YTD Change($): 0.9
Current Quarter:
Current Year: 0.645
Current Quarter:
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Thanks, Ethan and thanks, Tiger. So, this concludes the Q&A section. So, I would like to thank everyone for
participating on the call. If you have any further question, please send your question to our Investor Relation email at
ir@pax.com.hk. Thank you.
Thank you very much.
Thank you.
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