Pax Global: 2021 H1 Earnings – Key Points to Know!
- Rupam Deb
- Aug 19, 2021
- 4 min read
Pax Global – 2021 H1 Earnings Results
On 12 August 2021, Pax Global released its financials for 2021 H1. Revenue grew 31% y/y, gross profit grew 26%, and net profit grew 34%. In view of the strong growth, the company raised its full year revenue guidance to >25% growth, and increased its interim dividend by 71% to HKD 0.12 per share.
Here are our key points from the earnings results and earnings call!
Revenue grew by 31% y/y, from HKD 2.5 billion in 2020 H1 to HKD 3.3 billion in 2021 H1. This was driven by its wide product portfolio, and very strong growth for its Android smart terminals which increased in revenue by 86% y/y.
During 2021 H1, PAX demonstrated stability in supply chain management and product delivery, providing full support to acquiring banks and payment service providers to accelerate terminal deployment during the pandemic. All these contributed to gaining recognition from global customers with a growing market share.
On revenue by geography, the strongest growth came from USCA (United States and Canada) and EMEA (Europe, Middle East and Africa), at 72% and 63%, to HKD 387 million and HKD 881 million, respectively.
In the USCA, contactless payments have been booming since the outbreak of the pandemic. As the first provider of Android smart terminals in North America, Pax has delivered new generation terminals to merchants through the nationwide extensive Independent Sales Organization network, with its A920 smart terminal as the best selling model there, garnering widespread adoption from increasing number of top-tier retailers and Quick Service Restaurant (QSR) chains. The company expected North America to continue to be one of the key global markets.
In Europe, the rising transaction limits for contactless payments among many European countries during the pandemic increased the demand for payment terminals. Pax delivered particularly positive performances in Italy, the United Kingdom, Greece, Germany and Poland.
Pax’s largest market, LACIS (Latin America and the Commonwealth of Independent States) saw lower growth at 17%, to HKD 1,481 million. In Brazil, Pax successfully launched its first M-series product, the M30 Android PayPhone, which is compliant with all major industry standards such as PCI 6.0, EMV and NFC Contactless.
APAC (Asia Pacific), which now includes the revenue of China (instead of separately), grew by 12% to HKD 570 million. Pax saw increasing shipment of Android smart terminals particularly in India, Malaysia and Vietnam, with Pax more than doubling its sales in India, as the nation’s digital payment infrastructure undergoes rapid expansion thanks to multiple initiatives by the central bank and local government.
On Android smart terminals, the revenue grew by 86%, making up >35% of total revenue (compared to >30% one year ago). Its PaxStore ecosystem continued to expand, operating in more than 80 countries around the world, with over 3 million connected terminals (compared to 1.1 million last year), over 5 000 applications, covering payment, ordering, ticketing, inventory handling, marketing loyalty initiatives, tax refunds, etc. However, the SaaS solutions revenue still remained small at more than HKD 20 million (i.e. <1% of total revenue), although it grew 320% y/y.
The company commented that “in the face of the challenge of the pandemic, more merchants recognise the value of the business intelligence with digitization. Digital transformation is no longer the exclusive remit of large enterprises. Thanks to Pax’s innovative Android smart terminals and the cloud based PaxStore platform, even small merchants can embrace the digitization of business operations and payments to seize the opportunities under the new normal. PAX’s all-in-one Android smart terminals enable merchants to analyse customer behaviours, create automated marketing campaigns, manage inventory and more, hence strengthen their operational management and marketing efficiency.”
Gross profit grew slower than revenue, at 26% to HKD 1,327 million, due to a decrease in gross profit margin from 41.6% to 40.0%. The decrease was mainly driven by the appreciation of Renminbi, and an increase in costs of certain raw materials.
On raw materials, with the influence of the pandemic, the global electronics industry has been facing shortages of electronic components. Pax has adopted multiple measures to mitigate the negative influence, including but not limited to conducting advance procurement of chips and other components, optimizing product design and using alternative components with more stable supply as substitutes, and strengthening communications with suppliers in order to enhance the efficiency of logistics and supply chain operation.
On operating expenses, selling expenses grew by 41% to HKD 334 million, due to the increase in sales commission driven by revenue growth. Administrative expenses grew by 16% to HKD 444 million, mainly due to the increase in R&D expenses of 19% to HKD 232 million.
For the remaining points of this earnings summary, check them out at our Multibagger Research Series (linked below).
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