BirdDog strategy discussion

Names of companies are one of those superficial factors that actually do matter. Peter Thiel has a riff about how PayPal is a much better name than startups like Uber, as we inherently associate a “Pal” as something positive. We associate Uber with sometimes semi-toxic Nazi propaganda.

BirdDog is a branding that I like. Bird Dogs are assistants who do a lot of the work for you. This is what the co-founders had in mind when they came up with the name, but apparently they were only sold on it when Eamon Drew… drew… a mockup of what would become the logo.

This is one of the half dozen reasons that BirdDog is my favourite under $50m publicly listed company (at current prices, of course).

The product

BirdDog produces pan, tilt, zoom cameras that are supported by NDI, an open source software that delivers high definition video at a very low latency. NDI is the factor that makes BirdDog a business, it’s in all their marketing brochures and they talk about it in all their interviews e.g https://birddog.tv/icc-belfast-goes-all-in-on-birddog-and-ndi/As far as I can make out, coming from a very much non-video technician background, NDI is a good software and all the nerds seem to like it. If you want to see the discussions with the video engineering geeks, go check out the reddit where BirdDog and NDI comes up pretty frequently: https://www.reddit.com/r/VIDEOENGINEERING/

Once again, I am not an SME in this area, but listening to podcasts by video engineers and such has more or less confirmed to me that all the video nerds like the NDI framework. And further, most of the geeks are happy with BirdDog products (with some notable, and potentially serious, issues with one particular 4k Quad firmware: disallowedlinkBirdDogUsers/posts/1196349307611028/). As an aside, if you go through the comments in that FB thread, you will see the CEO Dan Miall absolutely busting his ass to fix the issues and communicate with his customers. I love his approach as a founder, he clearly knows his business and is absolutely locked in there with the target demographic to fix the issues he's got. It's clear these products are his own, personal, responsibility. He's hands on and I love it.

Overall, the big picture here is that BirdDog are producing high-end, specialty cameras and hardware for a technically literate, professional, customer base. It’s an industry that can quickly detect problems with products and hold the manufacturers accountable. This is not, so far, a company that is producing a product for people outside of the AV space. I’ll discuss their marketing, catalogue, and website a little later.

The business

BirdDog went public in December 2021, and has had a dismal year. On 31 Dec 2021 BirdDog shares were sitting at 72c, after the initial IPO of 65c per share. At time of posting, we’re down to 14c. That’s an 80.5% loss if you were unlucky enough to buy at the peak.

The company pocketed $33m after the IPO and has mostly managed to keep a healthy balance sheet in the last 12 months. They’ve expanded every department, particularly sales and engineering. If a company is going to expand, it’s usually a good sign that they’re pumping up the sales department. Every business is ultimately about sales, and CEOs who don’t understand that are usually setting themselves up for failure. I like that Dan Miall, ostensibly an engineering kind of guy, has the strategic foresight to make sales his priority post-IPO.

Look at the books for the 21/22 FY.

Revenue of $39m
EBITDA of -$456,000
Debt of $2.7m
NPAT (before ABS) of -2m
ROE -4.5%
Total equity $46m
BookPerShare 22c
High inside ownership of ~44%

Current SP: 14c

Compared to the prior FY the books didn’t look great (for reference, they made a NPAT of $1.3m in 20/21 and revenue was flat), but the company had its story straight. They were hiring more people, building up inventory due to shipping and supply chain issues (all companies were doing this last year), and included an interesting explanation of their loss:
“The loss for the Group after providing for income tax amounted to $2,039,232 (30 June 2021: profit of $1,354,034). The loss for the year largely relates to a one-off, non-cash interest expense of $1.96 million to bring the host debt contract portion of the convertible notes to their present value under the effective interest method, as well as a non-cash gain of $0.25 million on the embedded derivative through to conversion date.” I believe this is in relation to the IPO, but the word salad is lost on me. Can a finance guru translate for the rest of the class?

Overall, the books look fine. The marketing/sales teams are new, it takes a while to come in, learn about the product and establish connections in the field. And it takes a while to get brand recognition going. So the flat revenue is excusable and the increased cost of the business is expected in what is ultimately still a new company.

The current market cap of $28m for a company with little debt, $39m in consistent revenue, and a strong standing within the target industry… seems like a fantastic buy. Whoever was valuing it at $147m after IPO, on the other hand, were putting their money into a blender.

BirdDog’s strategy

BirdDog are marketing themselves to businesses who can afford to buy expensive, but high quality, equipment. They’re predominately inserting themselves into the live music and entertainment industry, with the vision clearly being to get these cameras installed in as many venues with live music playing as possible. I think it’s a great idea. Live bands in any medium+ sized venues would value the opportunity to film their gig, which incentivises good music venues to get these cameras installed.

Supporting this is the reality of where their sales are going. Broadfield (https://www.broadfield.com/) is BirdDog’s biggest distributor, and the company seems to be completely focused on getting products to professional video producers.

There are other avenues too, such as medical/surgical theatres and the like, that need crystal clear and very responsive cameras. But I think this is a distraction. I don’t see stuffy administrators being the right target for the deliberately comical branding, and I don’t see this area as being the sister demographic for the entertainment industry.

Go to the BirdDog website as a novice and tell me that it’s easy to navigate for somebody who doesn’t already know about the industry. The website, the hardware, the terminology, it’s clearly all aimed at those who are already broadcast technicians. As an outsider, I don’t know what 90% of the site is trying to tell me.

Compare BirdDog’s $4,195USD P400 page (https://birddog.tv/p400-overview/) to the randomly selected, similar price range, eos C70 (https://www.canon.com.au/cameras/eos-c70). I know exactly what Canon wants to tell a novice, and it does it very, very well. Similar to how Sony is advertising their multi-thousand-dollar cameras (https://www.sony.com.au/electronics/interchangeable-lens-cameras/ilce-7m3).

BirdDog has a director whose credentials are beyond criticism. If Andrew Baxter isn’t overhauling the website, I assume it’s for a good reason. They might be trying to distance themselves from more popular competitors like Sony and Canon, and establish themselves as the camera of choice for PTZ cameras in a professional environment. As Don Draper once explained to me, a good advertising campaign can either aim at professionals, or the every man, but not both. I suppose Baxter is going for the former.

My completely unwarranted advice would be to open a line of webcams meant for, and marketed at, streamers. If you built a price-varied range of cameras for streamers, sent out a dozen of them to the big Twitch streamers, and started building some major brand presence, you end up selling to all the try-hards who want to copy the big names. This is how those uncomfy, dumb looking, racing car chairs have caught on. As a shareholder, I want to see BirdDog in JB Hi Fi, even if this slightly dilutes the existing targe audience of professional video producers. The company, the branding and the marketplace, are all perfectly aligned to catch on with Mother drinking zoomers. And if the pros are talking about the brand on Reddit, amateurs will defer to them and assume all the specs are good.

The TL;DR

It meets my criteria of good CEO, good financials, very good product, a marketers dream branding, and severely undervalued.

Consider that the company has inventory and cash of $41m as of their 21/22 annual report, but the company itself is trading at a market cap of $28m. I’ve personally never seen a company so well resourced to expand, while trading this comparatively low. I think the $.22 book value is an extremely safe target and would represent an easy-ish(!) 33% return on current prices. Though I value BirdDog significantly higher than that.

I think the management team are aiming too low for now. They should probably spin off a different product line for all the billions of people who frankly don’t have any idea what NDI is, but want a decent camera for their streaming projects. Cut the jargon, forget the tech specs, focus in on the fact that you’re delivering a sleek looking camera with a memorable brand.

I like the idea of getting these cameras into music venues, pubs and corporations like the company has been doing. And there’s room for school auditoriums or breaking into other areas with security cameras for both commercial and home locations too. I see a lot of space for growth, and with so much of that growth depending on marketing, I like that director Andrew Baxter, has a lot of experience in this realm.

Do your own research and shout out