PART 3 - Operating numbers, building the P&L and the JVI...

PART 3 - Operating numbers, building the P&L and the JV

I mentioned this in the original thread but because I run my own book, I always run very conservative scenarios. Ultimately I'm not selling or pitching, I'm trying to determine if an investment could work out based on a set of assumptions. You may choose to be more aggressive in your numbers, but even with my conservative lens I still get a very high valuation, which gives me confidence to hold this long term.

To build a proper P&L for BCC it gets pretty complex. You need to account for equipment sales, airtime, royalties, Roadpost's stats and the JV. Some of these numbers we don't have and won't get but there is still some science behind key assumptions.



A quick run down of the above. My airtime COGS is based off Iridium's GP, which is a good proxy. I'm being conservative with Roadpost's ARPU - we need this for the JVBCC have said they make a small margin on the Zoleo equipment - I'm assuming 10%Customer phasing takes into account the fact that subscribers don't all subscribe on the first of the half. This phases the period contribution


There's a lot to absorb above:
The most important point is that BCC often quote equipment sales. This does not mean that once a sale has been made it also adds a subscriber. Sales are made to the JV to be distributed to other retailers who stock the device. When they sell it we don't know. BCC for the first time in the annual results provided subscriber numbers for Australia ~1,300. We don't know subscriber numbers for RP so I'm using equipment sales into that market as my proxy. I'm then lagging equipment sales by a massive 6 months. This is hugely conservative but I do this because I'm not running monthly numbers, I'm keeping it aligned to BCC's reporting period. If you recall in my assumptions further above, I've also applied a customer phasing multiple to the numbers so I'm running a further conservative overlay on the numbers. This doesn't really impact my DCF but it does impact my FY23 valuation. On unit sales I've been conservative as I cap sales in ANZ and North America at 5000 units and 25000 units respectively per reporting period. It's simply to early to know how big this could go but I'm pretty confident that both markets could do at least those every 6 months will have higher numbers no doubt and that's why he's the king of line wiping If you sum my ANZ customer numbers to the end of FY23 you will get ~14,400. This is below BCC's guidance of 15,000 due to my conservative lags as mentioned above. I'm ok with this but I appreciate it's super conservativeAirtime royalty reflects the immediate payment into the respective territory from airtime income. It's essentially split three ways; (1) BCC's share goes straight into their accounts [i.e. 70% of gross profit], (2) RP keep their share, and (3) the JV accrues the balance, which is 30% of ANZ GP + 30% of North America GP + 50% of ROW GP.
The JV P&L


It takes a bit to understand the inflows and outflows but when you do it makes sense. I've back tested it on FY21 numbers so it's pretty close. I have no real idea on opex costs so these are an educated guess. It could be more or it could be less.

Airtime applies the phasing multiple against subscribers and ARPU. For my numbers (for now) I'm keeping a static ARPU but really as I build this out further I should have a separate ARPU per each period. This also applies to RP and also the exchange rate. COGS is where it gets interesting. It takes 70% of airtime revenue per my assumptions plus adds in the two royalties that are paid to BCC and RP respectively. It also incorporates the COGS for equipment purchasesThe key takeaway is that Roadpost's large equipment sales will lead to a very large base of subscribers. Even at a low ARPU and even after taking out the royalty, this becomes a large inflow for the JV and drives some material profit numbers.Essentially a VERY large part of BCC's valuation will come from the JV, which is why it needs to be incorporated in any analysis otherwise you're leaving too much on the plate.
In the next part I'll consolidate the P&L and update the valuation but you can see BCC's share in blue in the above table. In FY23 the JV should contribute almost $8m in earnings so that should give you some idea of how big this could get.

Feel free to poke holes in any of the above. GLTAH