BirdDog Technology Ltd

ASX:BDT

Earnings Call Transcript

[Sam Wells]

Good afternoon, everyone, and welcome to BirdDog's First Half FY '24 Results Webinar. My name is Sam Wells from NWR Communications. And joining me from the company today is CEO and Managing Director, Dan Miall; as well as Chief Financial Officer, Barry Calnon.

Following a brief summary of the results released to the ASX yesterday afternoon, the audience will have an opportunity to ask questions. You can do so by submitting written questions via the Q&A function at the bottom of your Zoom screen. We will endeavor to get to all questions asked in some cases, combining questions on the same or similar topic. Thank you, and over to you, Dan.

[Daniel Miall, executive]

Thanks very much, Sam, and thank you, everyone, for joining us on this call. Firstly, I'd like to say that as a business, this half yearly results has not been in line with expectations of management. And really, this presentation, I'm here to talk to you about what we've done, the actions taken and where that's heading us towards as we move forward. It's not necessarily an optimistic presentation. It's more about a realistic update on where we're at in terms of the business. And there's been a lot of work that's happened over the last 6 months.

Firstly, there has been a big shift in our communication strategy overall. One thing that we have done in the past is, for example, when we're announcing products, we'd announced them first up. And then during the process of developing and bringing them to market, we then release them out to customers. So effectively, we have an announced and then deliver methodology.

And you could argue we've been doing the same thing in terms of our communications with shareholders as well. But over the last 6 months, we've completely turned that on its head. And now we're more about delivering on what we've already achieved and announcing it then. And that's true for our products, and it's also true for how we're talking about the business moving forward.

So getting into the actual business itself, it has been a challenging period, as is undeniable looking at the performance. I've mentioned before in previous presentations that we have some market conditions that have been against us. That's been in our actual market itself in that content creation market, as well as some macroeconomic challenges we've had, specifically in Europe more than anywhere else.

Overlaid with that, over the last 6 months, we've also had some supply chain challenges, which you would have seen some announcements back in November around some suppliers that we've had some challenges with. We've been implementing a wide range of changes, and this presentation really goes to explain to you what those have been and how we're going about making sure that as we move through the rest of this calendar year and this financial year more soon, is making sure that we're delivering on those changes to make the business far more structured and actually in a much better place as we come through.

We've risen to the challenges that we've seen with very much a sense of urgency. If you look back to December, we actually made some really strong decisions around reducing the cost base of the business. That's something that was really important to us as we are moving into the next generation of our products. And as we are moving into the next generation, really of the business, we need to give ourselves the best chance of returning back to profitability, returning that growth trajectory for both us and you, our shareholders as well.

In addition to that cost out program, we've also enhanced our governance that we have within the business. We've employed 2 new nonexecutive directors, both with some really key and specific skills that we think will really help us drive the business moving forward.

In some small pieces of good news as we cycle into our next generation of products, we are already seeing firm orders from our distributors around the world. Now, these products aren't due to ship until April. We haven't announced them publicly to the market, but obviously our supply chain is ramping up and we're seeing firm orders that give us confidence that our strategy in terms of the products and how we're going about bringing them to market is going to be successful.

Some other positive signs that we've seen as far as green shoots is the U.S.A. in terms of revenue over the last December and January period has seen over expected in terms of its revenue compared to management expectations. And in Europe, we've actually seen in February the highest revenue that we've seen for the last 6 months. So there is some small changes coming around which gives us some confidence as we move forward.

Now, at this point, I'm going to share my screen and move into the presentation itself. So bear with me just a moment while I do that. Okay, so you should now see my presentation here. It became very clear to us at the start of the financial year that we needed to make some change, and that change needed to be widespread. We've been reporting as a company and we've been on the stock market since December 2022. And we did see some challenges coming along.

Now, those changes actually go through a wide range of the business. It goes everything from our market and our marketing activities through to our engineering and product development and the lifecycles of those products right through to sales and commercialization of the business.

We've looked at all of those pieces, as well as some other things like I mentioned, in terms of our cost base to ensure that the changes that we can put in place will make sure the business is far more robust as we move forward. Now, unfortunately, that list grew over the last 6 months when we began these challenges with one of our suppliers. So we've added legal proceedings in there in terms of the challenges for the business.

Now, in terms of what we've done over the last 6 months with change, it's been very swift and very decisive. A lot of these changes weren't necessarily easy ones. They were hard, but very much strategic driven.

Now, before I go into some of the actions we've been taking in the business, I would like to mention just a little bit about our supply chain side of things. It would be appropriate for me to talk about the ins and outs of this legal proceedings that are happening and that we're navigating at the moment. But I can say that we're working methodically through this process in concert with our suppliers to ensure that we're working towards a path to resolution as soon as possible. As soon as there's more details, of course, we'll share that with you and we're very much motivated to make sure this is resolved as soon as we possibly can.

Now, moving back to the business itself, as I mentioned, there's been some widespread changes. A lot of those are centered around what you can see, outputs from the business in terms of customers. That's to do with go-to-market, rebasing our go-to-market, or our marketing around return on investment, making sure what we're actually doing in getting that messaging out is hitting the mark and delivering some sort of revenue or some kind of return on that effort.

As I mentioned earlier, we're no longer doing this forward-looking release strategy. Now that from the outside, looks like we haven't had a lot of announcements over the last 6 months, but in fact, we've been doing a huge amount of work. And that announcement cycle is really starting to ramp up. So as we move into the back end of March and into April, we've got a suite of products that will be announced and immediately available. So the good news is there we will be returning to a news cycle, but it's a new cycle with deliverables.

Within that engineering and within products, we have fewer but more planned releases. And that means that when we do come out with new releases to market, they're meaningful. They have a lot more planning around them in terms of the quality of those releases, and they hit the mark a lot deeper.

The last thing on our go-to-market that I'll talk about is our tiered dealer program and our regionalization. The lifeblood of our business is really our resellers or our integrators that are out there in the field. What we've recognized is that 80% of those -- so 80% of our business is run through the top tier of dealers. So we've set up a new program that enables them to be far more motivated and far more engaged with our products as we move forward. And that's really going to become clear as these new products come out as well.

Now, as will be no surprise, Europe has been a challenge for us, and it continues to be somewhat of a challenge. We've lent into that in terms of how we go about getting our products to market. And one of the biggest changes we made over this half is to upend the way we do our distribution into the region.

The first thing that we did was make sure that our customers in regional markets, such as France and Germany, were able to access the products in a regionalized way, in a localized manner. So that's about coming and arranging our distribution model to be working directly within these markets. We now have direct distribution in France and direct distribution in Germany, which gives us a lot more presence in those markets and a lot more traction as we move forward. Of course, we still have distribution in other regions as well, including the U.K., Ireland and various other parts of Europe, but it allows us to be far more granular in that process.

Getting back to our products, we did actually employ, at the start of this financial year, a gentleman by the name of Josh Bernstein. He's leading our product team, and that's everything from our engineering through to product management, through to QA.

We've seen some dramatic improvements since he's been in place. It really is putting in a lot more rigor into the way we approach delivering our products. And really, the only stat that I probably should give you on this is the support ticket stat, and that's gone down by 50% in the process of the last 12 months. That indicates the quality of our products and ultimately the customer satisfaction is increasing dramatically as we're moving into this new cycle of how we're releasing products.

We've spoken about before, and I mentioned earlier about our operational efficiency or cost reduction programs. Back in December, we put that in place, which has reduced the overall cost of the business on an annualized basis of $2 million. We're looking at expanding that. We've got a number of programs to extend those savings while also being very careful not to save our way too far to impact the businesses and its operations.

One last piece to talk about with our board and governance is the 2 people that we've put in place. That's Peter Cook and Alan Sparks. Both of these gentlemen have deep knowledge in their areas of expertise with Peter Cook, specifically in MedTech scale ups. And that relates directly to our Remedi Solution, which I'll talk about in a moment.

Alan Sparks, on the other hand, has a great deal of expertise in technology, retailing that technology, bringing it to market and scaling up and making sure that the operational effectiveness of the business in that space is really strong. And I think you'll all agree both of those expertise are really welcome within the business as we move to this next step.

Our next generation products, I'll get to later, but we've got some very exciting products coming out. One of the biggest things that we've been focusing on is returning to profitability, and these products help us do that by our enhanced margins.

So summarizing what we've been up to over the last 6 months, we do remain well capitalized, and that's not lost on us. We're very judicious in how we deploy that capital. Our revenue is undeniably down, and that's been a real challenge.

As I mentioned, that's very much front and center of the management's mind and how we turn that around. Beneath that story, there is some information that may help explain that. That is because of our supply chain issues that we've been focusing on or we've been dealing through. We have been running down our inventory on cameras, keeping in mind that cameras are the largest contributor to our revenue. That's created some challenging situations in terms of how we generate that revenue, and therefore that's impacted a significant amount of the revenue we could have got.

Added to that. As I've mentioned before, some market challenges and also some regional challenges that has put downward pressure on the revenue. As I mentioned, with our new products, as we're moving into diverse manufacturing, with our new products, we have enhanced margins and we also have firm orders moving forward. So we're expecting that to change at tune over the next period.

Recurring revenue is something that we've been working through, and we've been speaking over the last few months about our Remedi Solution, which is our medical technology and collaboration solution that's now started to deliver revenue for us, as has our cloud solution, which is gaining progress and gaining momentum, especially in the post production environment with our partnerships with Adobe and Avid.

I'll hand over now for Barry to talk about our finances, and then I'll get into a bit more detail with some of the products and functions that we've done.

[Barry Calnon, executive]

Sure. Thanks, Dan. Quickly in relation to the performance, Dan has talked about sales. And in terms of margins, yes, they are down slightly 11.5% based on PCP. But if we look at the FIN '23 versus the first half of FIN '24, we're down sub 10%. That's primarily a result of our camera line and the depletion of those units and pushing those out into the market and pulling them through.

In relation to our overheads, if you look at those straight off the bat on the right-hand side of that slide, you're looking at now, as Dan has explained, we've taken $2 million out of that business. Clearly, that wasn't reflected in the first half and will start to be reflected from the month of January.

In relation to the balance sheet, it's a pretty simple scenario. We've maintained our cash PCP. That is between 31 December 2022 and '23. We've actually increased it. Over the last 6 months, that has depleted effectively in line with our working capital. So inventory debtors and payables against our cash. And that working capital reflects our EBITDA for the last 6 months.

And we put out an announcement yesterday in relation to the buyback. So that's $694,000 worth of cash outlay that we did in the recently completed half. So we have stopped that, and the Board continues to contemplate its [ naval ] vis-à-vis doing anything else in relation to that buyback.

In terms of the net cash used in operating activities, that is effectively still reflecting our working capital requirements. And really, we're still pleased to have $20.5 million, $6 million in the bank, and we continue to be prudent around that deployment.

[Daniel Miall, executive]

Thanks, Barry. So moving back to updates on what progress we've made because I think this is really important in setting the tone for what we've been doing. We certainly haven't been sitting around waiting for our core market to return or waiting for Europe to place purchase orders. The progress we've made really is around our products and also the systems, as I mentioned.

Specifically, Josh, who came in to look after our product management, our product development side of things, has had some real tangible improvements to the business, strengthening our product offering and making sure as we go-to-market with our new products, we can capitalize on these new ways of doing things.

We've got high-quality products. We're able to deliver them in incredibly fast pace compared to what we were before. There's some really great processes that have been put in place here that will really strengthen the business moving forward.

Now as I mentioned earlier, there has been a gap in cycles as we recorrect or as we change the way we announce our products. So as we move into this April period, there will be a number of products announced, and that will really create a great deal of momentum as we move forward.

I mentioned earlier that we've gone local in Europe in terms of how we're dealing with France and Germany and other regions as we're starting to turn them on as well to make sure that as we have these new products and as we move forward, we're able to absolutely capitalize on that.

We've also empowered our Continental team to be able to work directly with this -- with our distributors and with our customers, where previously sales were centered in the U.K., that's now actually regionalized across Europe as well.

We've revisited our marketing plans entirely owing to the shift in the way customers work without getting too detailed into the customer market, we're really at what I consider the third generation of customers. Our first customers were early adopters. They just wanted to get into the technology, and we're quite tacky about things.

Second generation customers were very much about COVID and needing cameras and needing something that would help them get their story out there. Now we're into third-generation customers, and that requires a big shift in the way we're doing our go-to-market, and that's what's been happening in the background over the last 6 months.

Our customers now are after solutions. They're not after technology. They're not after an acronym of what a camera may or may not be able to do. It's very much about what the camera can do for them and what our solutions can do for them. And that's going to become very apparent as we move forward with our new generation products.

There's been far more structure across the business, in general, creating a much greater sense of accountability and pace. The entire company is very much focused on our delivery and return to growth and return to profitability.

From the outside, engineering really has seen the most dramatic or the most visible of changes. I've spoken about those in terms of the higher quality updates. They're actually a whole lot deeper as well. I mentioned that we're doing less updates but far higher quality. A great stat with this is within the updates that we've released over the last 6 months, there's been over 300 new features and performance updates across our products.

Now that delivers real value to our existing customers, but also assist us in showing people that we're absolutely backing our products that we have innovation still in mind and the products are absolutely able to grow and improve over time.

I did mention our support ticket rate has been reduced significantly, which is great. The exciting thing really is our full release schedule as we're coming up into this half in terms of new products and how that's going to impact the business. The fact that those margins increase still allows us to really supercharge every revenue dollar.

In terms of revenue -- in terms of engineering, the best way I can describe it is we've very much grown up over the last 6 months. Our supply chain side of things have seen a significant amount of effort put in. We've had some challenges, as I mentioned, but we've responded to those challenges by diversifying, making sure that this can't happen again in terms of having a single supplier with concentration risk and making sure the suppliers that we're moving with as we move forward can help us deliver products that are truly BirdDog products.

We've designed our new generation products really from the ground up to make sure that they are our products that we have full control over them and that they don't look, feel or operate like any other products they have absolutely unique innovation at its core.

So looking at the supply chain in a little bit more detail. The real focus we've had here is on making sure our margins and our ongoing supply can't be interrupted moving forward, that we have higher expectations and margin.

In fact, what we've managed to deliver is very much at the top end of expectations in terms of margin for our organization. As I mentioned, that's going to super power -- supercharge the power of each revenue dollar.

We've recognized significantly over the last 12 months and learned from this that the U.S. market is far more robust. It really is the home of television, and it really is driving the change in how people make television with network-based solutions like our NDI, our BirdDog solutions.

Doubling down on our focus with the U.S. is really important to us, and we're very much as part of our supply chain optimizations focused on making sure our delivery to the U.S. market is as deliberate and as planned as possible. And that includes making sure that we're part of the GSA requirements, that's general services agreement, which allows government departments, education and military to be able to purchase our products far more easily. That's something we haven't been part of. It's something we're planning to do, and that did get somewhat interrupted with our change in suppliers, but we're very much focused on making sure that's part of our deliverables as we move forward.

Now the last 6 months has seen our strategy be looked at very closely. We've certainly been delivering and certainly been focusing on the strategy of how we build the value of the business moving forward. We started out with products with little hardware boxes like converters and our cameras, for example. And then we move into software-based solutions and then cloud-based solutions.

Now we've taken a little bit of a half step, I think, in the last 6 months as we've moved through that process, but very much that strategy is live as is evidenced by our Remedi Solutions but also by all of our camera and hardware products, the fact that we're integrating our cloud technology and our software technology into all of our products. We've embedded a whole lot more in terms of AI functionality and additional functionality within our next-generation products as well.

Really, the design of the BirdDog business is to be scalable and flexible to reach other markets, and that's really how this integration piece works demonstrated by Remedi and demonstrated by our Adobe and cloud-based solutions.

So moving forward to talk a bit more specifically about Remedi. Remedi is a solution that really has taken our cloud-based technology and our camera technology and wrap that up in a way that's really easily operating -- able to be operated by medical professionals. And that's a great little case study of how we can deploy our products in different markets.

The great news with Remedi is that it is now starting to be deployed. We're starting to see revenue, and we saw that in the first half of this financial year, and we're seeing a great deal of momentum growing over that period as well. To describe Remedi effectively, it takes -- the good things that you get out of Teams or Zoom with the interactiveness that you need as a professional in an operating theater or in a patient environment.

Allowing a professional on the other end that can be anywhere in the world to control a camera, to be able to zoom in and see exactly what they need to see, provide some opinions or some advice, and really be part of that operating theater that can be used for training, but it can also be used for expertise around the world.

We've seen the real interest in this in 2 environments. One is for medical device companies for training, and the other one is in operating theaters for creating centers of expertise where regional areas or other people can dial in and be able to be taught, learn or seek advice from various people. The use cases as is described here, is there's proctoring and consultation and education for next generation devices.

One thing to note here is we had spoken in depth with a company called Phenox. Now that project was going to see a rollout of a number of Remedi systems across Asia Pacific. Phenox has had some changes to their go-to-market strategy in terms of where their people are located globally, which has interrupted that rollout.

We are still very much in communication with Phenox and also with other medical device companies, and certainly Remedi is gaining a huge amount of interest across those large medical device companies.

Now similar to what we have with Remedi, we also have with our cloud for post production. And really, this is kind of the next step as we had the success that we saw with Remedi and the uptake of interest in our Remedi Solution, in post production. So think Hollywood, think episodic television. We built a solution around our cloud offering that allows editors and producers to be able to use our system very easily. It's really re-spinning our cloud technology that's our own IP into a very easy to use, a very integrated solution.

We've seen some great traction with that in terms of people wanting to apply this technology within their post production workflows. And a really exciting thing that happened in the last week is Adobe announced their very latest version of Adobe Premiere, which is used by millions of users around the world. And as part of that announcement they also included the information around BirdDog clouds in our post production solutions.

We've got a great relationship with Adobe and we'll be showing some more of that product solutions at the upcoming shows around the world, as we will with the equivalent software, which is told Avid Media Composer.

So to summarize where we've been up to or what we've been up to, it has absolutely been a challenging period for the business. We've lent into this, but we're certainly not trying to make any excuses for why the business has not been performing as we would have wanted. Over that period, we've certainly put in a lot of change, we've put in a lot of effort, and we're also working to deliver on some exciting new generation products.

We've optimized our product lineup. We've optimized the costs in the business. We've optimized the margins in the business, and we've also done a whole lot of work in terms of the processes that we have within the business to make sure we're very much at the top of our game to be able to deliver on returning to growth, returning to profitability.

We do know very much that our core market will come back in terms of the content creation side of things, but we're not sitting idly by waiting for that to happen. We're building products that have enormous product market fit for that market but also for adjoining markets like AV and also security.

We're also doubling down on our efforts within the medical space with Remedi and also post production. This is all with the drive to make sure we're insulated in the future for many concentrated risk in terms of markets, in terms of suppliers or in terms of technology.

So for us, it is a challenging period, but also very much an exciting period of where we're heading now. We did speak in our last update that the market is likely to turn in terms of the post production sorry, in terms of our content creation market as we get to the back end of this calendar year, and we still very much think that's achievable. And in fact, if anything, we've accelerated that with the initiation of our new products. I remain absolutely steadfast in resolving our remaining distractions that we have and getting back to what we're actually good at, which is delivering products and growing our market.

On that note, I'd like to thank you for listening. Shareholders, I'm very much appreciative of the patience that you've given us. We're very much aware of the need for us to grow as a business. We're very much on that in terms of how we've delivered those changes, and we're very much excited about where we're going ahead.

I'd like to hand back to you, Sam, and we can probably go through some Q&As before we wrap up.

[Sam Wells]

Thanks, Dan. Thanks, Barry. [Operator Instructions] I'll kick things off with a few presubmitted questions here. Can you talk us through what exactly triggered the decision to execute cost out and restructure? Was it a board-led initiative and why now?

[Daniel Miall, executive]

Absolutely. So I think the cost out structure, we -- if we look back to when we first started as a public entity, very much we're looking at investing as quickly as possible into R&D and into growing our markets as quickly as possible.

Now as much as we're very much invested in that, and we wanted to grow as quickly as possible in response to the market not being as robust as we wanted and having some challenges around the world, it became very clear that we wanted to make sure we stay in line with that.

Now it doesn't mean that we've tossed it out entirely in terms of our R&D. It doesn't mean that we've removed too deeply, but we're very much are keen to make sure that we're in step with what that market can deliver us to make sure we have a sustainable business. When that became clear that, that wasn't going to be the case to the immediate future is where we made those decisions.

[Sam Wells]

Thanks, Dan. And what gives you confidence we're through the worst of it? Can you point to any tangible outcomes of the actions taken in the half?

[Daniel Miall, executive]

Yes, for sure. I think in terms of through the west of it, there's a number of different metrics, I suppose you could look at there. Firstly, as I mentioned, December and January in the U.S. actually exceeded our expectations, which is really quite exciting, considering the challenges we've had. As we roll into these new products, that also gives us a lot of confidence. We do have firm orders for these new products. So we know where that's heading in terms of building out the revenue.

Europe actually had, as I mentioned, the highest revenue in the last 6 months, which is by some metric better than what we've seen over the last 6 months, of course. And really, I think the overall feeling that we're getting in terms of the projects that we're speaking to, the rollouts that are being planned over the next 6 to 12 months are showing that there is a return to a buying cycle within that core market. And then of course we're seeing just the first steps in what's happening with Remedi and as that grows into far more footprints, we'll see an increase in that revenue contribution as well. So we're not waiting for the core business to drive us back into profitability.

[Sam Wells]

Great, thanks. A few questions coming through on your prior contract manufacturer. What proportion of BirdDog sales in dollars and product range was impacted by these disruptions?

[Daniel Miall, executive]

I'll let Barry talk about the percentages. In terms of the product range, we did have a singular camera product manufacturer, and that is the one that we're having some challenges with. So effectively, our current range of cameras was affected, which does represent a pretty sizable chunk of the revenue.

[Barry Calnon, executive]

Yes. And the percentage was 2/3. And therefore, the dollars for the half year was just south of AUD 7 million against our 10.6 in revenue.

[Daniel Miall, executive]

Which is effectively to, I guess, [ bookend ] that the reason why we've spent a huge amount of effort within the business to make sure these next-generation products are coming out as swiftly as possible.

One thing I did skip over which I meant to highlight is typically a term cycle or a development cycle for developing hardware to being out in market is around about 18 months. We've actually managed to bring that back to 7 or 8 months is where we're expecting these products to come to market. But that's with our new QA and our new engineering processes to ensure that what we're bringing out is not only a replacement product that we can sell. It also includes a whole bunch of innovation, but of course, the quality that people need moving forward.

[Sam Wells]

Great. Thank you. And outside the cash deposits, what amount of BirdDog inventories are they currently holding?

[Barry Calnon, executive]

In terms of the camera manufacturer?

[Sam Wells]

Yes.

[Barry Calnon, executive]

Yes. So as at 31 December, with the depletion of the camera units, we're down to less than 1,000 units at 31 December, which is less than $1 million at cost.

[Sam Wells]

And sorry, Dan, were you going to say something there?

[Daniel Miall, executive]

Look, I was just going to add in here that the -- it's a little painful at the moment in terms of the camera is being run out of stock. It does create some pressures around revenue, which we've started to see. But it does mean as we cycle into the new products, we don't have that same risk of having those products that we're now -- that may be superseded sitting on the shelf.

[Sam Wells]

Okay. Great, thanks. And can you just -- this is a sort of a final question on the topic. What are the specific claims this contract manufacturer has made against BirdDog in respect to the breach of contract?

[Barry Calnon, executive]

Sam, I can answer that. We continue to update the market. We're in active and very prudent discussions. I speak to the attorneys again this morning and the lawyers, we will continue to update the market as matters progress in both of those jurisdictions. We just simply cannot say any more at this moment.

[Sam Wells]

Okay. Great, thanks. Can you talk to the impact, if any, of next-gen products on existing inventory and finished goods?

[Daniel Miall, executive]

Yes, absolutely. I think in some way, we might have already covered it, but it's worthwhile making this clear. Existing inventory for camera is very much run down over the course of -- since the end of December through to where we are now. We've continued to sell down that inventory to the point where we're very much at a low level of inventory across our camera range, which means as we're bringing out the next generation of products, there is no impact on aging products in that camera space.

[Sam Wells]

Great. Thank you. On Remedi, how much revenue has been recognized since launch? And when was this recognized?

[Barry Calnon, executive]

Thanks, Sam. So we've derived $70,000 of income from Remedi of which 2/3 has actually occurred subsequent to 31 December. So it was a small piece in the December quarter. And one of the advents of Peter Cook coming on Board is to certainly strengthen that sales approach, leverage his connections in the MedTech world. Pete's been in the MedTech world for literally 3 decades, and therefore help us turbocharge the Remedi Solution in the operating theaters and proctoring and education in the medical fields.

[Daniel Miall, executive]

Absolutely. And the level of additions to the pipeline with Remedi is accelerating at a pretty remarkable pace.

[Sam Wells]

Great. Thank you. And maybe just a follow-up, what is the recurring revenue generated by both cloud and revenue -- Remedi?

[Daniel Miall, executive]

So cloud is 100% recurring revenue. So each year, it's a renewal of that same amount, again, effectively for customers to continue to use the platform. So it is entirely a as a service platform.

In terms of [ revenue ], it's actually split between 2 components. Remedi is a solution that uses our hardware products and then there's the platform that is ongoing. So effectively, it's around about a 70% in terms of recurring revenue and 30% upfront. So the recurring revenue is around about 70% of the upcoming, of the first revenue.

[Sam Wells]

Great. Thank you. And speaking on Remedi, has the [ Phenox ] agreement change the forecast investment in Remedi and what likelihood and timing are you expecting for a new distribution agreement for the product?

[Daniel Miall, executive]

So in terms of the investment in Remedi, we're quite fortunate in the way that we've developed this product in terms of -- it's actually based around our BirdDog cloud platform. So the embodied investment that we have there has given us a really very much a walk-up start. We do continue to improve Remedi. We know there's additional markets that we can go after in terms of training [ en masse ], which is with our Remedi cast platform, which we are still investing in R&D.

We're certainly watching carefully to make sure much like every other part of the business and the reasons why we looked at our costs in the past 6 months to make sure that we're spending appropriately and that the market is actually wanting the products that we're delivering. We're very much of the opinion that is the case with Remedi, and we're expecting to see some encouraging signs with that over the next quarter and beyond.

[Sam Wells]

Great, thanks. Is there any update on the prior Chief Marketing Officer and his current status within the business?

[Daniel Miall, executive]

Look, I think there is somewhat of an update. So in -- amongst these changes, so over the last 9 months, we've made a significant amount of changes across the business. And as I mentioned in the presentation, that included a lot of our go-to-market activities. Now as part of that, our former Chief Marketing Officer and my co-founder is no longer in the business. He's actually -- his period of notice is running out at the end of this month. And so from that point of view, he's been looking to move on to something else. For me, personally, I really do wish him the best. In terms of the business itself, we obviously are working with our next generation of marketing as we move forward.

[Sam Wells]

Great. How do you think about TAM for the Adobe partnership and the opportunity there specifically?

[Daniel Miall, executive]

Look, my background actually before BirdDog and before the live production is in post production and that is exactly where this Adobe solution is. So I do know a significant amount about how this solution will be used, and that's really where it has come from.

In terms of TAM, Adobe has multiple millions of active users that are signed up to the Adobe Premier platform. Our job is to make sure they're aware of that as much as possible. Now of course, the TAM is the amount of Adobe Premier users out there. What we need to do is look at what that percentage is.

Now of course, we'd be happy with the single digit of that user base to begin with and then grow from there. We're working very much actively with Adobe to build that awareness. As I mentioned, we had a launch that happened just in the last week in terms of the latest Adobe Software. And then in upcoming shows, such as April, there's an NAB show in Las Vegas. We'll be present with them and co-presenting this solution.

So for us, the TAM is multiple millions of units. We'd be very happy with the single digit of those to begin with as we roll this out.

[Sam Wells]

Great. Thank you. And the final question for the session. Do you disclose the churn rate for BirdDog cloud subscription?

[Daniel Miall, executive]

Do we disclose it? No, we don't. Happy to consider that for future presentations, Sam.

[Sam Wells]

Okay. Great. Thank you. I think that's it for questions today. Should there be any follow-ups, please feel free to send them through via email, and we'll aim to come back to you. And with that, Dan, and Barry, I'll pass it back to you for any closing comments.

[Daniel Miall, executive]

Thanks very much, Sam. I think for me, what I'd like to highlight here is this is a bit of a challenging presentation to do and the fact that we have had a really undeniably challenging period, and that's not lost on us. And I'd like to think that what I've been able to do is convey the amount of work that has been done and the recognition of the challenges and what we need to do to rise to those.

We do have a significant amount of work that has been done and there's a significant amount of positivity that we're seeing moving forward. We're starting to see some of that roll through, as I mentioned, with the U.S. starting to return to expectations as well as levels of sales. Europe seeing some improvement. And then, of course, with our new products, delivering more margins and being imminent in terms of delivery.

As a team, I'm very proud of what they've achieved. As a business, obviously, we need to be far more profitable. And that's really what we're laser focused on as an entire team as we move forward. So as I said before, I'd just like to thank our shareholders for the patience. I really do think that what we're doing will return, thank you to that as we move forward. And of course, as you mentioned, Sam, if there's any more questions, we're more than happy to answer at any stage. So thank you very much.

[Sam Wells]

Okay. Thanks very much for joining today's first half FY '24 results webinar. Enjoy the rest of your day. Thank you, and goodbye.