BirdDog Technology Limited (BDT) Earnings Call Transcript & Summary

Thank you for joining this BirdDog Technology Investor Webinar. I'm Rudi Michelson of Monsoon Communications. Joining us today are BirdDog CEO, Dan Miall; and CFO, Barry Calnon. This webinar is off the back of the back of half-year results lodged this morning. And our purpose here is to provide investors with the chance to be brief direct and ask questions on BirdDog's progress. [Operator Instructions] I'll now hand over to Dan Miall to begin the presentation.

Thanks very much, Rudi, and welcome, everybody, to our webinar for the half yearly performance update on BirdDog Technology. So to begin with, I'd like to just speak a little bit about the progress that we've made in what has been a really significant period for BirdDog. We've been working on a bunch of different programs to stabilize the business and really return us back to a trajectory of confidence and growth within the industry and within the company, of course. We've had many achievements over this time. And as I mentioned, we've reached a number of milestones, which we'll detail throughout this presentation, which gives us confidence in where the business is heading moving forward, but also underpins the work that we've done. We have a dogged determination in our return to positivity. We know from a technology perspective and from a market positioning perspective, we've got great times ahead of us, and we've been really positioning ourselves to capitalize on that as we move forward. So before I start on the presentation around what we've been up to for the business, I think it's worthwhile going over a little bit of an update on our corporate overview. So those of you that are familiar with the BirdDog story, we're very much a company that's about delivering high-quality video production equipment for the live streaming or content-creation markets as well as moving into the AV and medical markets as well. Our core competency is building out workplace solutions. We don't see ourselves as a single camera manufacturer or a widget manufacturer, so to speak. We're very much all about building solutions for our customers that are tailor-made to make sure they can get the best out of the very latest technology. We've always been a trailblazer in terms of building new functionality and new workflows, and that continues with this next generation of products that we've been delivering. Network-based technology is at the core of what we do, and that's very much the way the industry is trending. And so our core values as a business are very much holding up in the market as that progresses around the world. From a corporate perspective, we have our Board, which is chaired by John Dixon, and then there's myself that's on the Board as well as our nonexecutive directors, which is Alan Sparks and Peter Cooke. Together, we've been working very closely to ensure that as we're moving through this period of the business, we're navigating this in the most economical and also the most swift way to build out the product range that we're doing, which is ultimately the lifeblood of the company. Our CFO is Barry Calnon, to the right of me. And Barry has very much been in charge of making sure that as we're building out these new technologies, we're doing so in a measured and valuable way to the business and ultimately to the shareholders. So moving forward to this half, this is the first half year of 2025, and we've seen some success in a number of areas whilst also we're still retaining some challenges that we're dealing with, although I would say that we're dealing with them in quite a measured and also very successful way. Firstly, looking at the products. As I mentioned earlier, the products are very much the lifeblood of the business. We are a technology company that's available -- our products are available around the globe. Without the latest technology and without applicable technology, effectively, we don't have a vehicle for us to capitalize. Now those of you who may have been familiar with the story previously, we have had a dramatic change in terms of our supply chain and product delivery over the last 12 months. And I'll go a little bit more into that later on. But effectively, what we've done is build out a new generation of product lineup. This has allowed us to leapfrog our competition. And at this point now, I'm very proud to say that we have a very solid, strong lineup that's being really well received by the business -- by our customers. More importantly, on the business side of things, for the first time, we're actually reporting the highest margins ever. We're seeing our gross margins hit above 50% for the very first time in the history of the business, which is a very exciting milestone. But across the board, our margins are dramatically higher. That puts us in a great stead as we move forward building demand now that these products are starting to become available in the market. On the other side of things, the expenses in the business, by bringing out these products, we have seen an extended amount of R&D that we've had to bring forward. Effectively, as I mentioned, we have a whole new product lineup, which is the product of having to change our supply chain and product delivery methodologies. And that's brought forward a lot of R&D spend that we've had. So it has been, if you like, a fairly expensive year to bring out these products. It's a highly accelerated model that we've taken on by bringing out a huge amount of products all at once. And that does mean that the R&D spend has been accelerated. And that's reflected in some of the expenses that we've had. Now importantly, as a business, we are all about capitalizing on that technology we've built. So as we have the products finally coming to market, the R&D spend will tail off. And the focus really then becomes on how we bring that products to market in terms of marketing and sales. And so we have an end in sight, if you like, in terms of the elevated R&D spend. Our cost control methods have been very much front of mind for quite some time as we've been working through this period in the business. And we're very happy with the inroads that we've made there, but it is always front of mind in making sure that we are delivering these products and building a business that's as efficient as possible. You'll see here there's an image of some of the products that we've announced. Now these are the products that are already launched and in market as of the first half of this financial year. So there's a full lineup of products that allows us to go into the live production market. This is really key for us, and it allows us to get back to our core competency, which is delivering solutions. So for us, these products have been well received by the market and has allowed us to embark on our next step, which is actually building out that awareness in terms of sales and marketing. As we move forward, there is additional products that we're bringing out to bolster up that lineup. But the underlying factor here is that we have delivered on both the innovative nature of the company and delivering products to customers. But importantly, the out-of-box experience and the actual -- the quality of these products is now leading the industry, and we're really excited about what that means in terms of the feedback we're getting from our customers, but also what that means for the future of the business as well. As we move into the second half in terms of products, this is really the -- where the end is in sight in terms of the R&D spend. Just recently, we had a trade show, where we announced a couple of new products. This is over in Barcelona. This show is called ISE or Integrated Systems Europe. This shows all about AV and unified communications. So the announcements that we had there are very much focused in this area. And it really bolsters our product lineup. And the great news with this is we have had exceptional feedback on this. The desire to pick up this technology and the industry's reception to this has been extremely strong. The other thing that was really important at this show is the feedback has reaffirmed what I've just said around the quality of the products and the applicable nature of what they do. Some of the other things that are really important around these product releases is back to that workflow solution side of things. It's not all about cameras, it's about making a solution for customers that want to buy our products. You'll see there's a keyboard controller there, as an example. This is really an enabler for us to sell more than a singular camera to be able to sell multiple cameras at a full solution, which really accelerates the revenue possibilities for the business. All of the products that we're delivering are very much strategic in nature and very targeted towards an end-user workflow in mind. The other product here is the one at the front there, you'll see, which is POD. This is really a very innovative product, which has no competitor at all, which allows meeting rooms to be far more integrated into a large organization, and we're really excited about what that means in terms of the sales of that particular product and then also the attachment sales for various other products that BirdDog has. Moving forward to our half year results. Now in terms of the business itself, over this half year, cost control and margins have very much been a theme as well as the products themselves. We have made a dramatic amount of inroads into the cost control within the business, and Barry can talk a little bit more about that in terms of the impact on that from the financial side of things. And margins obviously being increased, still allow a much more positive path forward for us. In terms of losses, we have reduced the losses that we have incurred. You'll see there's a significant improvement in that. However, that is still a work in progress, but the trajectory is very much heading us into the right direction here. So cost control and also demand for the new products with those elevated margins are heading us in that right direction. We do remain in a strong cash position. It has been an out of bounds in terms of expenses here. On top of the elevated R&D, we've also had the litigation piece that we've dealt with, which is now completed, as well as some other various activities that have happened that have -- one-offs that have been imposed on the cash position. However, we do remain still well-funded and very much with the [ sight ] in the end as far as the new generation of products and R&D elevated spend being towards middle of the year finishing. We're very confident in the cash position of the business and the ability for us to move forward and become a generational company again in terms of cash. As I mentioned, our R&D has tailed off significantly or will tailed off significantly within this year. And that's a really exciting place to be because at that point, we have our full product lineup being a new product lineup, which sees us through for a number of years in terms of the products that we have in market and be able to return that ROI on that as well. We do actually have -- sorry, I was going to mention that this is all a $300,000 expenditure of intangible assets. So I might get Barry to explain that as well because that is actually, in the scheme of things, with our losses this year, a significant portion of that as well.

Thanks, Dan. You're right. That does represent -- that $309,000 does represent 15% of our loss. We had, under AASB 138, apologies to the non-accountants watching; met the recognition and measurement criteria under intangible assets, AASB 138. However, because of the losses, the impairment accounting standard AASB 136 meant that we had to take that to the profit and loss contributing to our loss. So a $1.7 million loss became a very flat $2 million loss for the half year.

Thanks, Barry. A couple of other points on this before I move to the next slide is the markets that we serve. As I mentioned, we sell our products globally. The U.S. is very much our core market, and that's been actually amplified over the last period. We have seen, as we've reported previously, European -- the market has been very much subdued. And we're still seeing that as a very lumpy market. It does have some signs of positivity moving forward, but it is quite unpredictable at the moment. So for us as a business, we're very much focused on the U.S. because that's where we can get a far more tangible feel on how we move back to growth. And of course, the European market will follow once we've got that market up and running as well. In terms of rebuilding our market confidence, this refers to what I was talking about before around the litigation piece that we had last year and the driver of that to produce a whole new product range. Effectively BirdDog 2.0 is we're dubbing it these days, is an entirely new product lineup that we've had to reeducate all of our partners and ultimately, our customers on as well. And that process is actually working really well. And we're actually seeing throughout the first part of this next half of the year, the uptake and the interest in this is accelerating as well. So Barry, I might hand over to the financials for you to comment on this.

Sure. Thanks, Dan. So in relation to the profit and loss, yes, we were disappointed at the 16.7% decline in revenues. And the eagle eyes amongst us would have noted a $380,000 ratchet back from our 4C that we declared on the 31st of January. That pertains to $30,000 worth of trading expected programs that we did that were reclassified as part of our audit/review process at the half year end. Pleasingly, in terms of the margins, as Dan mentioned, they are at record highs across gross margin, which is effectively sales less the cost of sales, net margins, which accounts for freight tariffs and just about everything else before we get down to what we call net operating margins. Pleasingly, every [Technical Difficulty] was down PCP at an average of 30%. And our two biggest ones averaged 25% down PCP. That is our R&D spend that Dan's talked a little bit about and our EBE or employee benefits expenses. And finally, the losses were stemmed by 60%. Yes, we can't and not shy away from a $2 million loss, but it certainly beats recording a much more significant loss in the prior corresponding period. In relation to the balance sheet, the cash has dissipated, and I'll talk about that in one [Technical Difficulty]. But in terms of the working capital, we have bulked up our inventory coincidentally by 1.8, which was the value that we put on the sea at the end of October and landed inside the borders of America prior to the President's -- the U.S.A. President's inauguration on the 20th of January, which meant that we were ahead of any prospective tariff regimes, which came into effect on the fourth of February and [Technical Difficulty] the President was floating another tariff impost. However, we're really well insulated from that, particularly around the margins that we're driving at the moment, and we'll continue to watch that space. In terms of the cash flow, as we disclosed in the post events or subsequent balance date events in our financial '24 year results, there was two spaces that totaled $4 million literally at the end of July of 2024. There was a $2.4 million inventory buyback for exact inventory at cost [Technical Difficulty] loss in our inventory remains strong.

Thank you very much, Barry. So moving on business strategy, what is our strategy moving forward? To ensure that we're building the business in the right direction. So for us, as I mentioned earlier, the products really are very much the lifeblood of BirdDog. We are a technology company, and our products very much -- they represent the opportunity for revenue for us. So the delivery of those products is #1, and that has been #1 over the last 12 months in terms of that. Over the next few months through to the middle of the year, we see the rest of that product lineup be finally delivered, which means that we can absolutely refocus the business purely in terms of expenditure and time focus on both the marketing and also ultimately, the sales of our products to build our market share and also build ourselves into newer markets. So the strategy is very much from shifting from bringing our products to very much moving forward into delivering and expanding out the reach of those products themselves. We're very much laser-focused on the U.S. as our core market. That's proven itself to be far more reliable over the last few years, much more resilient. And of course, with the change in presidency, there is a bit of a bump in business confidence overall. And we're seeing that certainly from our industry itself that there's much more activities happening in the U.S. So deliberately, we're working very much on the U.S. to make that our benchmark for success, which will ultimately drive ourselves into a profitable position before we then focus on other markets, which hopefully in that time will also recover overall. Some of the things that we really have been focusing on with the change in presidency, of course, there has been talk of tariffs, and some of those have already been in place. Now ahead of that, we put a significant amount of our inventory into the U.S. We have a new warehouse there that's holding that stock, which allows us to have stock in there before that change in tariffs. That's given us time to insulate ourselves for what may or may not happen in the future. And that means that we can protect those margins that we've very much been pushing towards. So we're in a comfortable position at the moment. We're certainly watching both the market in terms of what other companies are doing with tariff changes. But also our margins as well. Those hard-won margins are not going to be diluted from a tariff point of view. We will adjust our average selling price necessary to bring those back in line. But for the moment, we're very much in a strong position from that point of view, which means that we have inventory in country, which allows us to save very much on freight. And it also means that we were not subject at this stage to a dramatic shift in tariffs. But that's certainly a watch from that point of view. The remainder of the next [Technical Difficulty] in our core market, but also into the neighboring markets of AV. I mentioned that show and the new announcements that we've had there, they're very much met with a great deal of interest and excitement. So we're excited as we move forward on top of having a core market stabilizing and understanding these new-generation products, giving us a great opportunity moving forward. We also have the neighboring markets that are now showing a great deal of attention to what we have. On the back of these products becoming finalized and shipping, it means that our R&D focus can very much reduce in terms of our costs, which alleviates a lot of the expense within the business as well. Those one-off R&D [Technical Difficulty] and that means we can normalize that R&D spend back to our historical norms. And of course, we remain very much on an efficiency drive on our cost control. We don't ever consider that to be complete. We're always monitoring that to make sure that we are getting the most in terms of the efficiencies in the business and ultimately, the efficiencies in delivering products to market. So on to the market in terms of the outlook, we have reported in the past that the market has been a little [ lumpy ] in terms of demand. We are seeing that exacerbated in the European markets. And as I mentioned earlier, the U.S. is becoming very much our focus, and it has been far more stable. What we're also seeing is that it's trending upwards in terms of the inquiries and demand. It does give us a reason for optimism. It does give us a reason to believe we are on the right path. And the timing into our new products being available, it looks like it will be actually in the right time in terms of how the market is shifting from a slightly slower [Technical Difficulty] in bundles and solutions. It comes back to my opening delivery rather than individual products. Some strategic products that are just coming out now is our keyboard controller, which I mentioned earlier, that allows not only us to sell that keyboard controller, which has the same margins as the rest of the products, but it's also a catalyst for selling bundles of multiple cameras. So instead of selling potentially a single camera to a customer, we're now selling multiple cameras as well as our keyboard controller, which amplifies the average selling price to our customers. This is very strategic and very much important in terms of bringing those products to market. Another encouraging sign is on the AV side of things. the POD product that I was mentioning, that little round puck-shaped thing. We actually have over 1,700 of these on back order already. Now this demonstrates the demand for the underlying technology that we have. That product itself, it's great to see the demand for it. It doesn't work in isolation, and it is very much designed to work with cameras or other devices. So it shows that there's an opportunity for us to sell more cameras, but ot also more importantly shows that there's demand for the solutions that we offer in terms of the NDI-based subsystem that we use. So it encourages us that we are very much in a market that is receptive to new technology and is receptive to the core offerings that we have. So looking forward, what are we actually trying to achieve? I think the product range is really important. Having a singular product in market, it makes it hard for us to really grab a foothold and really push out our story as BirdDog 2.0. Now that we have the core products in market and the final ones coming over the next few months, that's really important for us to get the mind share of both our partners and also our customers. That end is in sight in terms of delivering those. And it also gives us confidence in terms of the spend and our cash position. So whilst it has been an elevated R&D spend, as being noted by Barry, the -- that spending is coming to an end as we're bringing these products to market. And then we're now able to capitalize on that R&D that we've done and get that return on investment. Another area of focus -- renewed focus, I should say, is Remedi. Remedi is our medical solution that we have been developing for a couple of years now. And we've had a number of different installations that have happened that have been really quite successful. The challenge we've seen, though, is the time for that market to identify a product that they like in Remedi and then turn that into an installation inside a medical institution like a hospital can be extended. So the sales cycle is quite long. What we've really doubled down on recently is going to market in that medical technology target market. This is a much shorter sales cycle, and we're seeing some recent inroads into there, looking really encouraging. So for us, Remedi is very much an area of focus, still. And by doubling down on this MedTech side of things, it allows us to look at shorter-term wins within that technology that we built. With the U.S.A., the final piece on that, of course, is very much about focusing on that market. We're very much focused on both the core market that we have in our live production and also the AV side of things. We're investing in terms of the amount of focus we're putting on there in terms of user stories, in terms of engagement with our customers and also our partners to make sure that we're amplifying the awareness of BirdDog as we move forward. And I think that really is encouraging, the reception that we're seeing there and also the overall trajectory that we're seeing in terms of the market looking more positive as well. So at that point, that brings us to the end of our presentation. So I'd like to open it back to Rudi, if there's any questions, we're more than happy to answer anything.

[Operator Instructions] We've got a couple of questions here on margins. The first one is, the net margins are holding up above 40%. How will the bundles -- increased bundling of products impact the margin?

Yes. I think bundles are really important. And it's a good question because we've been very much focused on increasing the margins. Obviously, that's a core part of the business strategy moving forward. What bundles offer is us to have a solution for our customers. But again, we're being very careful to make sure those bundles, while they're attractive to customers, doesn't dilute the margins to a position that gets us back to where we were. So even with these bundles, we're seeing the margins sit above 40%. So we're very comfortable with what they offer. In terms of desirability in a customer-facing offering, it's very desirable. But of course, our margins are still very much protected in that. So it's a decisive move on how we make that work.

And for comparative purposes, that's above 40% at the net margin level.

Okay. The next question also on margins, just questions about margins for new products, those launched recently and those yet to launch by July this year. Are we going to maintain those net margins?

Very much so. That's effectively core to our business model moving forward is to ensure those margins are maintained.