BirdDog Technology Limited (BDT) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the investor update for BirdDog Technology. My name is Sam Wells from NWR Communications. And joining me from the company today is Co-Founder and CEO, Dan Miall as well as CFO, Barrick Calnon. Dan and Barry will today provide an update following the December quarterly announcement released to the outset this morning. Following today's investor update, the company will also be hosting a full investor webinar in late February, at that time -- at the time of the release of the half year results ending December 2022. At that webinar in February, participants will have the opportunity to ask questions of the management team. There will be no live Q&A session today. [Operator Instructions]. Thank you, and over to you, Dan and Barry.

Thanks very much, Sam, and thanks very much for joining our webinar today. I think I need to start off with saying that we're quite disappointed at start of the company performance for the last quarter, but we've got a lot of things we've been doing about that. And there is actually quite a lot of good news that's buried in underneath what we've been up to in the last few months as well. So on top of what we've just released in terms of our 4C, which is our quarterly cash flow, we'd like to go through a little bit of what's been going on, and also what we're doing about it and where the opportunities are for growth as we move forward, which we are still very excited about. So I think probably the first thing to do is look at the revenue side of things. Now obviously, the revenue has dropped off a little bit in the last quarter and actually it's been trending downwards for a little while. We've been doing quite a lot of research into this. And firstly, the core industry that we're in or our core markets are aimed at broadcast and live streaming. And what we've seen over the last few months is a slowdown in purchases. That is for our products, but also in across the whole industry. We've been interviewing and talking to our partners and also peers and also just general industry trends. And we're seeing the same news that's coming through across the board, that overall, the spending in that category has slowed down a little bit over the last few months. What we are seeing though, which is really quite interesting is some uptick. So over the last couple of months, we've seen Europe, which was the leader in that drop off in terms of revenue. Europe has started to pick up a little bit as well. In the December month, we saw a significant improvement there. And looking forward, they're actually sounding far more confident about where things are happening within that broadcast and live streaming market. Now interestingly, the U.S. was pretty robust over the last few months, but that has started to slow down a little bit as well. We're expecting that trend to follow Europe in terms of picking up again shortly. One thing that we are seeing is project-based discussions really starting to pick up, that gives us some confidence about where things are heading in this quarter and then more particularly into next quarter as well. So the top line revenue side of things, the demand in the core market has slowed down a little but it hasn't gone away, and it's certainly not a market share-based issue. It is overall a purchasing -- taking a breath, I suppose, is maybe the best way of putting it. We are very much excited about where it's heading and the ongoing and long-term demand within that live streaming and broadcast market is still very strong. Now interesting is what we're seeing in other markets. So our core market, as I mentioned, is live streaming and broadcast. Beyond that, we also have education, house of worship and also increasingly unified communications. Now our partnership with Zoom is getting stronger. We have tighter integration happening there. Those projects do take longer to come through, but we're seeing a lot of increased conversations around that. The issue we have in that unified communication and hybrid workplace is a lot of the construction work has also been delayed, which are seeing some projects with that a little, but not going away. We're seeing extremely robust demand within the house of worship and education department areas, which gives us, again, confidence that as the core market of our broadcast and live production returns to growth, we have a significant amount of growth opportunities moving forward. And that's very much within this year. It's not a longer-term side of things. Now in the meantime, we are very conscious in terms of our cash -- our cost improvements and our cash investments. Now since our listing, it's been just over 12 months since we listed on the ASX, and we've grown the team significantly. And there's been significant cash investments from staffing and also through to trade shows and marketing events support across -- a great deal of the company. What we're making sure is in a time where there is less demand of our products that we're also investing cash in an appropriate way as well. So with that, we're certainly well in really across the fact that our revenues are a little slow at the moment, and we're very much on top of making sure that our cash investments will return and be within our band of expectation, which is AUD sub-200,000 per month. We've made some significant changes. We being very mindful that what we're doing is building for the future. We're not trying to reduce all of the costs within the business, we want to make sure that as that return to growth happens very soon that we are poised to take -- to make the most of that. In terms of optimizing, it's coming through in terms of marketing. You will see that some of the trade show events that we're doing maybe won't be scaled up quite as high. It doesn't make sense to invest so much money in a market that's not purchasing as much at the moment. And also in engineering, what we're doing is really optimizing what products are coming out. And I'll talk to that in just a moment in terms of what we're doing to really improve our products and also our growth opportunities. What we need to look at really is how we're going to grow the business moving forward. Our core market is very much aware of our products, and that will return to growth. There is some opportunities at the lower end of that live streaming market that we're really bringing forward. And I'll talk about our product management plans with that shortly. The medical opportunities that we have, we spoke briefly about that and we did a presentation a few months ago about our plans for our cloud solution within the medical sphere that's coming along very well. We'll have a lot of news to talk about that shortly. And then on top of that, I've mentioned about house of worship and education really spearheading some of that demand. So whilst we're very aware that the revenues at the moment are lower than expected, it has been trending that way. We're also seeing a lot of significant information that's coming through from the channel, from our market, from our customers that, that buying cycle will return to normal very shortly. I mentioned briefly about product management. The lifeblood of our company is our products. We're very much an innovator and where our growth has come from in the past is all of our products, and it's all about the innovation. Now over the last 12 months, we've grown our team significantly across our commercial team, across our support team, across our engineering teams. But what we haven't done is really double down on that product management side of things. And I've been doing a lot of that work myself. What we've been doing just in the last couple of months is really bringing up that product management focus because that's all about delivering the next generation of products to what people want and more. And that's where we have a number of things that are happening in terms of new products and a lot of focus within the organization to optimize the bring forward of that. So as the market returns to that buying cycle, we've got even more products at the right price point with the right set of features that make it irresistible to buy and build our products. We remain very excited about the company. We're certainly very well funded to make sure that we are ready to grow when that growth opportunity comes, and that's very soon. What we are seeing is bookings into Q3 are growing. Our January bookings are higher than what we would have forecast or what we did forecast for January, which shows that whilst December was slower, it's actually evened out and showing some demand more than we expected in January, which is looking great for this quarter. And also, we're seeing some larger projects that are starting to come through commitments into next quarter as well. So we're very confident that the growth will return. We're very confident that our products that we have, have very much picked a purpose and the additional products we're bringing to market will bolster that even further. On top of our core market, we have a significant amount of opportunities in the wider opportunities around education and house of worship as well as unified communications. I'll hand over to Barry to talk a little bit about the financials some more and dig into some of those details, and then I'll continue from there.

Thanks, Dan. We just wanted to address a few points in terms of revenue, the inventory build and our cost efficiency measures before we hand back to Dan. Firstly, in terms of our revenue, we are down 3% from our September quarter to our December quarter with some revenue recognition measures clunking that down marginally under the net sales. So negative 3% quarter-on-quarter, negative 24% pcp for the quarter and negative 36% pcp for the half. Dan has talked about our frankness and our disappointment that those revenue levels were not meeting internal expectations. And I'll talk around our cost efficiency measures in a minute. In terms of our inventory build, our finished goods driven largely by new products, has gone from AUD 9.7 million at June, adding another AUD 2.7 million into mid AUD 12s million at the end of the half. Conversely, the inventory prepayments, and we've spent another AUD 3 million on those in the cash flow for the half has started to reverse, and we are very confident that our objective of holding 3, no more than 4 months' worth of inventory by December of 2023 is achievable. In terms of the embedded chips that facilitate field programmable updates, that really means that inventory of obsolescence is not a topic of discussion. In terms of our headcount, we've been deliberate and relatively aggressive in growing that to 42%, and that has been around building for the future. Right now, our cost efficiency measures have meant that we have rebased our overheads in line with our existing revenues and really living within our means. We have been incredibly productive over the last number of weeks and scrupulously looked at each expenditure line item in order to ensure that the cost improvements that we've implemented reflect our existing revenues. However, importantly, that is without jeopardizing the future growth opportunities of the business. We are incredibly focused on living within our means whilst we return the business to revenues and the anticipated levels that Dan has talked about. Finally, we are very well funded. Our cash position and our inventory balances mean we've got all [ about ] AUD 40 million in our net tangible assets from those 2 assets alone cash and inventory as of the half year. We remain confident and Dan is going to close off.

Thank you very much, Barry. I think what I'd like to do is really go back to the very first part, which is we've certainly acknowledged that we're disappointed in the overall performance from a revenue point of view for the last quarter, but we're certainly not fairly disappointed about where the opportunities are coming from. We're still very excited about it, and we're very encouraged by what we're hearing from our customers and from our channel partners as well as our peers. Our product mix is growing, and our focus on those products getting into market. We'll see that as the industry returns to that buying cycle, we'll be able to supercharge that growth. And then on top of that, supplemented with these new products and markets that we're going into. As Barry mentioned, we're incredibly well funded, but we're using that funding to the best opportunity at the right time. So we are excited about the future. We're doing something about making sure that the company is in the right shape now and then also into the future, both near term and longer term. And we look forward to having a much more exciting webinar as that revenue grows and our growth story continues. So thank you very much for joining us on this webinar. If you have any questions, please follow them through to NWR, and we'd be happy to answer them.

Thank you, Dan. Thank you, Barry. Thanks, everyone, for joining today's BirdDog Technologies Investor Update. That concludes today's session. Thank you, and have a great day.