Looks to be a small miss on a few things but this could be impacted by timing. It will be good see the balance sheet to see receivables and a few other things. Overall though I haven't seen anything that is a major concern though and the thesis remains intact. This could be a buying opportunity and that lower gap could get closed before we move higher.
Receipts from customers of $6.1m was lower than I was expecting and broadly maintains the same run rate from the previous quarter when we should be seeing some growth - this is where we need to see receivables. I expect a bigger receivables balance, which as Michael mentions, should convert to cash this present quarter (more comment on this further below)
Costs - we need to see this increasing as this reflects the manufacturing of the devices. Given the huge volume of orders we will likely see very strong product growth - nothing to see here tbh. We're also investing in new markets and growth, so staff costs should also increase. Marketing costs actually look a bit light and we could be investing more in this area given we're in growth - $118k for the quarter is nothing. Let's get this higher!
Product development - This will continue to increase rapidly as R&D leads sales and this was specifically called out as a key use in the recent CR. While we don't know exact margins and breakdowns by product category, Certus and Go! devices are typically high margin. We know this as pre Zoleo company gross profit margins were 40-45% and I'd expect actual GP margins for these devices to be 50-60% which is typical for specialist electronic equipment. This is effectively investment now for a large payoff in future periods. The interesting thing to me is that all these pay-offs will start to have similar timing so we should see some explosive numbers at some stage (probably 3-5 quarters away).
For any budding analysts out there, I always recommend comparing reports side by side. What you will notice if you look closely is that this 4C mentions revenue and strong revenue growth, while the Sep 2021 report mentions cashflow - obviously apples and oranges. You will note my previous comment that receipts from customers was lower than I expected, so BCC have been a bit clever and have moved the goal posts i.e. look over here and not over there. This is very common to micro caps. Not much of an issue other than something to be aware of.
But with BCC reporting revenue of $6.8m and 52% growth we can back solve for 1H22 revenue, which will come out to around $11.3m. This compares to my last forecast of $14.4m for the half (excluding other).
My numbers below:
So what's driving this miss? Well it's likely going to be a combination of things; (1) timing issues, (2) supply chain pains and (3) to a lesser extent, a reduced selling price for a short period vs my flat selling price estimate of $345 for the whole half
BCC reported ANZ subscribers of just over 2,000 for 1H22. I had 2,150 with net adds of 1,050 less lost customers or churn of 200 for the half (see below). You will recall that churn was higher in 1Q22 at 175 and Michael mentioned that this was being impacted by covid. I saw this as a bit of a one off but Omicron raised it's head and total churn ended up coming to 355 (ie. 175+180). This ~150 difference is pretty much the exact difference to my forecast subscribers and actual. What this kind of confirms for me (it may change over time) is that the sales vs subscriber lag is about 6 months. So when we sell a device to a retailer, it's taking 6 months to stock, sell and activate ALL that stock.
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The reason why I'm pretty comfortable that there are some timing issues is that back in June 2021 BCC said they had 5,500 devices for A+NZ (see below). These would be invoiced and shipped in Dec 2021. Now we know that there were a few supply chain/stock issues at Australia Post during Dec - the what/how/why I'm not sure but they were out of stock for a bit based on Australia Post's website. This may have delayed some sales.
Furthermore, I'm sure some of the sales in December would have been presents. There will be a certain amount of people that would have received the device on Dec 25th and would not have activated it yet given they only have a week to get it in this period. This will flow to the current quarter which I'm expecting to be strong due to timing.
Upfront I did mention that the thesis remains intact. We're in such a unique position that we can pretty accurately predict future sales as we know what the orders are. Our timing may be slightly out, but if you assume like I do that these orders will all be sold then that implies a VERY HIGH NUMBER OF FUTURE SUBSCRIBERS. These subscribers will be very lucrative, which is positive for revenue, earnings and the SP. GLTAH
BCC Price at posting:
39.5¢ Sentiment: None Disclosure: Held
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