Xro - xero

[gv1]

Does this qualify me in your view to voice an opinion on the quality of XRO's recruitment processes?[/QUOTE]
U b the judge and jury.
:p

[gv1]

[QUOTE=Baa_Baa;569349]The conversation is a lot less about Xero's capabilities, moreso about meeting the growth expectations and financials that are baked into an otherwise
Growth can only happen, if they have the capabilities to do so..

[Daytr]

Ha Ha! Briliant!
He could have mentioned prudent, sustainability, spruiking or ego & shown the door for the same reasons.


CFO probably mentioned "profit" on his first day and Rod said, "you can work out your 2 months notice, then you're gone"

[Baa_Baa]

Yes, hat tip to Harvey for quote of the week :)

The recorded live chat here is worth browsing through, it gives an informative insight to Rod's take on the results, the company and his shareholders. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11437425

I found his references to profit most telling, akin to the line of 'we are cash rich (investors money) so we'll burn that while we figure out a plan to go to profit, because we haven't got a profit plan'. Anyway, read the chat log and see what you think of it.

Meantime, the lacklustre USA re-boot and declining growth in all markets except ROW is a concerning backdrop.

One of the Herald articles I read today that I can't find anymore grr has a broker putting the share price fall on Friday down to a single large seller. Assuming it's correct, if anyone can find out who that large seller was, it may illuminate things.


Ha Ha! Briliant!
He could have mentioned prudent, sustainability, spruiking or ego & shown the door for the same reasons.

[winner69]

Rods APPLE WATCH is flying across the Pacific at the moment in the care of one of his staff

[Daytr]

I was deliberately being a bit kind with my numbers as I had already been seen as too aggressively negative by many on here.
Either way the numbers are poor when compared to the valuation of the company & the US is particularly bad.

At 500K customers I valued the SP around $15 & that was including the lottery ticket value.
Obviously the numbers are a little shy of that.

Harvey not sure about your percentages, but they look quite a bit out to me. ;-)


NZ 138 up 35%
Aus 203 up 86%
UK 83 up 77%
US 35 up 94%
RoW 16 up 100%

So better than your prediction. I think the market will be disappointed with US growth. Needs to be above 100% in my view.

[Harvey Specter]

Harvey not sure about your percentages, but they look quite a bit out to me. ;-)
Straight from the announcement. I note revenue in each area increased more than customer number.

[couta1]

www.stuff.co.nz/xeroannouncescouta1asnewCFO (http://www.stuff.co.nz/xeroannouncescouta1asnewCFO)

Rod quoted as saying, "We feel Couta1 has a much better understanding of loss making models than previous CFO's and will be a great fit to the team. We value his ability to view the bigger picture, remaining in for the long haul"

Remuneration package said to involve options for shares at $45. Love it NB I must give Rod a call Im sure he would value the loss making skill set I would bring to the company and I'm sure I would be able to significantly increase their losses over the next quarter, I'm wondering if id also get an overly inflated salary to help increase losses,those $45 options look devilishly attractive now don't they:cool:

[Daytr]

Maybe I misread. Are the percentages increases in revenue not the percentage increase of customer numbers?
I read it as the latter & if its the later someone needs to go back to school. ;-) Maybe the new CFO... ;-)


Straight from the announcement. I note revenue in each area increased more than customer number.

[winner69]

Daytr - here are numbers and revenues to clarify your thinking

[Baa_Baa]

Maybe I misread. Are the percentages increases in revenue not the percentage increase of customer numbers?

I think this is right - paying customers are the net total number of subscribers (signups less defections) whereas subscription revenue takes into account that a paying customer can choose between three different pricing plans (revenue), hence no strict correlation between paying customer numbers and subscription revenue, and likewise no correlation between growth in either. Correct me if I'm wrong.

7308
7309
7310

[winner69]

Number of paying customers is just that - customers who pay something (not those who gave it a trial or those who defected) - 475,000 of them at the end of March

Subscription Revenue is what was billed to these customers in the 12 months - $120.9m

There is also ACMR of $159m - what these 475,000 customers will be billed in the next 12 months if they stay customers (an annualised number but that dexcription is the gist), A year ago the ACMR was $93m so up 71%

[Casino]

Straight from the announcement. I note revenue in each area increased more than customer number.

You would expect revenue to lag for a SAAS business.

Has anyone pieced together the current cash-burn-rate? It stood at ~22m for the previous two quarters. But deduct 5.3m for the Monchilla acquisition and you're looking at only 17m. I worked out a cash outflow of 12m for the past three months (please correct me if I'm wrong). 22m, 17m, 12m...

[winner69]

Hey Roger you deleted your psot.

Send Rod a tweet instead did you

Taranaki18 
@taranaki12
23h
@roddrury @NortonAngus Stuff your watch. What about my shares �

[winner69]

You would expect revenue to lag for a SAAS business.

Has anyone pieced together the current cash-burn-rate? It stood at ~22m for the previous two quarters. But deduct 5.3m for the Monchilla acquisition and you're looking at only 17m. I worked out a cash outflow of 12m for the past three months (please correct me if I'm wrong). 22m, 17m, 12m...

Cash Flows for the last 5 quarters have been (outflows of course)

Mar 14 .......$11.8m
June 14.......$17.3m
Sept 14 ......$22.6m
Dec 14 .......$17.6m plus Monchilla $5.3m = $22.9m
Mar 15 .......$25.6m

Year to March 15 cash burn was $88.4m (inc Monchilla)

What you reckon next 12 months will be?

(Corrected Sept 14 number from typo in original post)

[Casino]

Cash Flows for the last 5 quarters have been (outflows of course)

Mar 14 .......$11.8m
June 14.......$17.3m
Sept 14 ......$26.6m
Dec 14 .......$17.6m plus Monchilla $5.3m = $22.9m
Mar 15 .......$25.6m

Year to March 15 cash burn was $88.4m (inc Monchilla)

What you reckon next 12 months will be?

Thanks for the numbers! I missed the 14.3m Matrix put in. I'd rather not make a forecast.

[Apathy]

I hope this doesn't turn into a PEB thread. I love to get opinions from both sides of the fence but gloating and taunting doesn't add anything to the debate.

I'm all for it - though I don't think anyone here does it better than Rod himself ---- he gets bonus points as he does it while haemorrhaging losses...

[Baa_Baa]

Thanks for the numbers! I missed the 14.3m Matrix put in. I'd rather not make a forecast.

Assuming, and sifting between the lines of Rod's online chat, the hiring frenzy is over or tapering off, then the cash burn rate should settle around here at $280k every working day. Imagine trying to sleep at night spending that much in the relentless pursuit of growth with no plan to move to profit.
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[winner69]

Just a reminder of the XRO strategy , the roadmap to greatness and much wealth

Don't know if red dot is where they are know but it represents accumulated losses of $155m (cash burn much higher than this) and 475,000 paying customers

Early days yet but all on track to the big pay day

Believe the story

[kizame]

Crikey cash burn of nearly 100mil/yr, so by the time that profitability model hits bottom it looks like it could be 150mil-200mil assuming it tracks the model,are there still going to be believers with deep pockets?
I guess that is going to depend hugely now on US market traction,I reckon it will be worth a punt for the next positive upswing on someone injecting more cash,then out forever.

[artemis]

Is everyone aware that you can bet on the Xero share price on iPredict?

If not, go to Browse Predictions / Financial Markets to see the options. Including buying a bundle of all options for $1. Obviously holding the whole bundle until contract close will return only the $1 but to make money the idea is to sell off the contracts you think will lose.

[Daytr]

So my guesstimate is that they will need around 1M customers to start breaking even & that's if they keep costs pretty much in check, something that Rod Drury isn't known for. At 2M customers they may justify their current market value with a P.E. of 10
What's people's thoughts on how long that will take to achieve ?

[Baa_Baa]

So my guesstimate is that they will need around 1M customers to start breaking even & that's if they keep costs pretty much in check, something that Rod Drury isn't known for. At 2M customers they may justify their current market value with a P.E. of 10
What's people's thoughts on how long that will take to achieve ?

Not sure how long but your suggestion is that the SP is 4x overvalued, ergo $5. the current SP has for a long time seemed to have banked the distant future. I can't get over the comments from Rod about having NO PLAN to profit.


Interesting to compare Xero's latest sales figs with the scenarios of Clare's past valuation of Xero. My take is that the latest figs place Xero between Clare's scenario's 2 and 3 with a share val between $8.11 to $17.16.

I agree, it would be very interesting to see the updated numbers put through the Clare Capital analysis again.

[Daytr]

No its not, because you need to price in potential.
I.e. say if they took 1 year to achieve 2M customers then the potential for growth is high & the current valuation is easily justified.
But if they took 5 years then its not by along chalk.
However its all well & good to price in potential, however there are no potential threats priced in.

[Baa_Baa]

No its not, because you need to price in potential.
I.e. say if they took 1 year to achieve 2M customers then the potential for growth is high & the current valuation is easily justified.
But if they took 5 years then its not by along chalk.
However its all well & good to price in potential, however there are no potential threats priced in.

If we assumed they can sustain a worldwide 80% growth it would be about 2.5 years away to 2m customers from the Mar31 baseline. But the threat as people have identified is that growth is tapering off as the existing markets mature, and there's no guarantee that the USA market re-boot will be as successful as the existing markets, though that's where the big cash burn is focused. The other threat of no plan for profit concerns me more, ergo no return for investors. Without that it's just a crap shoot on the share price.

[Daytr]

Yes & one other major potential threat is competitors or new software.
So the longer XRO take to capture market share the more likely that threat becomes a reality.
Percentages will always taper off at some point its simple math.
I suppose when that starts happening is the key point.
In the US they have gone to a very labour intensive model to capture clients & I can't see this sparking exponential growth either.

[Daytr]

Sorry & I disagree there isn't a profit plan, I'm just not sure I believe it.
The profit plan is simple. Grow paying customer numbers & revenue above costs.
Its pretty simple, but not necessarily easy to achieve as they have found out, outside their home markets.

[Baa_Baa]

Beg to differ. Have a read of Rod's comments in the Herald (link a few posts back). He specifically states that there is no plan for profit. Your plan sounds reasonable though it's not their plan. The point though is also about having no timeframe for moving to profit. It's this uncertainty that beggers belief in the share price.

[Beagle]

Any way you slice and dice this thing growth in the U.S. has been pathetic whilst contemporaneously cash burn has really intensified. I suspect the CFO that quit did so because he didn't want his career sabotaged by a company failure.
Maybe as a highly competent CFO he just can't for the life of him see how they can make money...AKA peeked under the hood and thought the engine was f....d

[blackcap]

Up more than a $1 today though so maybe the "one large seller" did push the price down.

[Baa_Baa]

Up more than a $1 today though so maybe the "one large seller" did push the price down.

There were a few small trades seemingly capping the price earlier, but it's off now. http://stocknessmonster.com/stock-trades?S=XRO&E=ASX

Obviously profit doesn't matter:

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Source: NZ Herald http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11437425

[Daytr]

No we agree, as he has no idea on how long or if they will actually achieve it.
Subtle difference to what I was suggesting. i.e. they have a plan, but just no idea on when or really if it will be achieved.
In some ways its understandable, but increasing costs in the hope that it is achievable is not.
If it was Rod knocking on everyone's door selling product then I'm sure they would have 1M customers by now, because there is no denying he's a great salesman.

[winner69]

I reckon he have 3-4million customers by 2020 .... the difference between a 80% growth decay rate and a 70% one (calculated by geography with a one time subjective boost in NA in 2016)

[kizame]

Soooo... If it's not certain if and when the company will make a profit,this makes the company more of a risk than it has been in the past,as time goes by runs are either scored or they aren't,and it seems at the moment when the company should be increasing the run rate,it is slowing down a bit.
This will follow 1 of two scenarios imop,

The first being that traction is slower in coming as attracting customers away from american institutions (intuit etc.)to a new kid on the block,is a battle.But starts to make gains as potential clients decide to give them a go. Short term problem.

That growth will trickle in at far below the potential,and not justify the share price(investors get frustrated) Longer term problem.

For me as an investment at lofty heights,the risk is way too high,my opinion is to trade out on the next upward wave,maybe another capital injection,and take a profit that way.With so much conjecture on here obviously there is a lot of doubt as to whether targets can be achieved,so make your money at the next opportunity.

[Daytr]

The other problem Kizame, as I have stated before I think they completely over estimated the tech savviness of the US small business market.
Cloud uptake trails significantly behind that of the likes of NZ & Australia is a very good indicator imo.
Many Mom & Pop businesses that have been past down & would have the old book register still!
They still have a large demand for cheques for instance.
I haven't written a cheque for probably 10 years!

[Baa_Baa]

Interesting the wee snippets that you have to be searching social media channels for rather than a getting clear unambiguous statement to investors from the CEO. I wonder if some growth investors won't mind just another couple of years of losses (ergo the USA fires up big time), but drag this quote out in two years if it turns out to be 3, or 5 years, or something else.
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[winner69]

Rod likes his story about global denomination
http://www.fool.com.au/2015/04/27/is-xero-fpo-nz-set-for-global-domination/

While shareholders were clearly disappointed, I believe that selling out of a company posting 81% revenue growth per annum might indicate a bad case of short-sightedness.

Net losses doubled, sure, but revenue also almost doubled and Xero is clearly getting bang for its buck with its extra spending on staff and marketing.

Believe the story

[winner69]

In another Fool article

Promisingly, the New Zealand-based Software-as-a-Service (SaaS) company grew its gross profit margin to 70%, hinting that its ability to scale profits could have further to run.



Good stuff

Believe the story

[JamesST]

Any way you slice and dice this thing growth in the U.S. has been pathetic
I think the US numbers are quite encouraging. I was pleasantly surprised.



I suspect the CFO that quit did so because he didn't want his career sabotaged by a company failure.
Maybe as a highly competent CFO he just can't for the life of him see how they can make money...AKA peeked under the hood and thought the engine was f....d
Do you have any info on this? Or pure conjecture?

[mfd]

Little snippet from Rod's web chat the other day when asked when they'd make a profit:

"It is a hard question. I don't know. We could slow down and do it next year. We could delay it 5 years. As this year develops we can decide. The role of the board and I is to maximise long term value for shareholders."

Seems to me they're throwing the cash pile at the market so that when they do decide to make a profit it's chunky, rather than pulling back and making a modest profit next year. If you don't like the strategy or the risk involved, noone is forcing anyone to buy in.

[Beagle]

I think the US numbers are quite encouraging. I was pleasantly surprised.



Do you have any info on this? Or pure conjecture?

It is conjecture but based on personal experience. Quite often highly experienced financial professionals are appointed to a senior position and the financial disciplines in that organisation, or complete lack thereof, (gross recklessness what I witnessed in an organisation I am sure you understand I can't name), are so repugnant to their own ethos of good financial management that they feel after having a good peek under the financial hood their position becomes untenable very quickly. Profit always matters unless you're relying on the greater fool theory.

Don't believe the B.S. In God we trust, all others must deliver results.

[winner69]

Life must be boring as for Rod at the moment. I bet he can't wait until he can exit Xero and move onto his new bid adventure.

While others run (do the hard yakka) Rod's role seems to be Chief Social Media Officer and doing the sermons at Xerocon. Of course playing around (motivating) with staff and the odd management / Board meeting are important.

Maybe he saying to himself every day 'Please buy us out, anybody' or 'Nasdaq might be the time, bring it on'

His next big adventure .....I'm sure he can't wait being a born entrepreneur. Wonder what it is?

[winner69]

Another link from Xero's CSMO

http://blog.lucidbooks.com/qucikbooks-vs-xero-our-bookkeeping-cleanup-comparison

Who Wins?

Yes, QuickBooks was first to the game with a bulk recoding feature, however, with Xero's new release they have jumped far out ahead. We'll see what QuickBooks has up it's sleeve next, but the "Find & Recode" feature from Xero will be tough to beat.



Believe the story

[Baa_Baa]

Not until the Knighthood winner, not until he's Sir Rod, arise!


Life must be boring as for Rod at the moment. I bet he can't wait until he can exit Xero and move onto his new bid adventure.

While others run (do the hard yakka) Rod's role seems to be Chief Social Media Officer and doing the sermons at Xerocon. Of course playing around (motivating) with staff and the odd management / Board meeting are important.

Maybe he saying to himself every day 'Please buy us out, anybody' or 'Nasdaq might be the time, bring it on'

His next big adventure .....I'm sure he can't wait being a born entrepreneur. Wonder what it is?

[Beagle]

Not until the Knighthood winner, not until he's Sir Rod, arise!

He gets the knighthood when he loses $500m in one financial year and growth exceeds 100%. The more you lose the more the growth is the more successful the company becomes. Brilliant..why didn't I think of this cough, "business model" :D

[winner69]

He gets the knighthood when he loses $500m in one financial year and growth exceeds 100%. The more you lose the more the growth is the more successful the company becomes. Brilliant..why didn't I think of this cough, "business model" :D

Probably deserves a knighthood for all the economic benefit he has brought to the likes of Wellington, keeping hundreds if not thousands employed, bring joy to thousands of small business owners as they balance their books, all those productivity gains for small businesses ......and I could go on on. Shareholders have indeed been altruistic and what's good is a lot of that cash flowing our way is overseas money

And I shouldn't overlook the millions that Air New Zealand get out of Rod and his staff .....as well as keeping the Welington Napier route viable (or has that been canned)

[Harvey Specter]

And I shouldn't overlook the millions that Air New Zealand get out of Rod and his staff .....as well as keeping the Welington Napier route viable (or has that been canned)For all Rod's talk about the Hawkes Bay, i am disaponited he hasn't move some of his workforce into the regions.

To get his knighthood, he should need to open a Xero office in Napier with over 100 staff (low skilled backoffice and support staff are fine) which will do great things to the region via the trickle down.

[Lola]

Life must be boring as for Rod at the moment. I bet he can't wait until he can exit Xero and move onto his new bid adventure.

While others run (do the hard yakka) Rod's role seems to be Chief Social Media Officer and doing the sermons at Xerocon. Of course playing around (motivating) with staff and the odd management / Board meeting are important.

Maybe he saying to himself every day 'Please buy us out, anybody' or 'Nasdaq might be the time, bring it on'

His next big adventure .....I'm sure he can't wait being a born entrepreneur. Wonder what it is?

Black Barn might be looking for a new face opera singer...heavens hes been working well in the right stature.

[Xirr]

Pretty sure salesforce.com was used as a company which xero aspired to become in its prospectus. Thought it might be useful comparing Xero to salesforce at a similar point in its history (based on # of employees).

Salesforce.com vs Xero

Full year ending
31 January 2006 vs 31 March 2015

Operating revenues
$309.9m vs $123.9m

Operating revenue growth
76% vs 77%

Cost of revenues (as % of revenue)
22% vs 30%

R&D (as % of revenue)
8% vs 40%

Sales and marketing (as % of revenue)
48% vs 75%

General and administration (as % of revenue)
15% vs 20%

Net income
$7.3m vs -$69.5m

Cash
$296m vs $269m

Employees
1,304 vs 1,161

FTE growth
70% vs 53%

Revenue / FTE
$238,000 vs $107,000

Market cap
~$4.5billion vs ~$2.8 billion

Market cap / operating revenue
14.5x vs 22.6x

[Xirr]

I think as an added comment for those without long memories or knowledge of the SAAS sector - Salesforce is pretty much the poster child of the SAAS sector.

if I recallcorrectly, Salesforce.com was one of the companies that Diligent used in itsprospectus to justify its IPO valuation because it had the highest revenuemultiple pre-GFC at around 15x. At the time, it seemed beyond belief thatcompanies were getting such high revenue multiples. How times change...

[Baa_Baa]

NBR (paid content) ... the Mobile access to paywall content is still free if you go to www.nbr.co.nz





Xero accused of breaking ASX disclosure rules (http://www.nbr.co.nz/track/click/28966/31271)

[JamesST]

Percentages will always taper off at some point its simple math.

They may go up again as well.

[Beagle]

Craigs are rating it a SELL and have a price target south of $17.00 in 12 months time.
According to 4traders.com other analyst coverage shows 3 brokers rating it underperform and only one hold. Hardly a ringing endorsement is it !!
http://www.4-traders.com/XERO-LIMITED-10674803/consensus/

[JamesST]

Soooo... If it's not certain if and when the company will make a profit,this makes the company more of a risk than it has been in the past
I personally rate it much less risky than it has been in the past. At IPO an investor took the risk that Xero would execute better than the incumbents and any number of startups. They have since shown that they can execute significantly better. They are smashing them convincingly.
The losses are minor in the scheme of things in my opinion. Their total accumulated losses of all time are only $155 million. That's less than the ACMR. It's less than half of the Lifetime Value of the customers that signed up in the last 12 months alone.
That is an extremely efficient use of $155 million dollars. The fact that outsiders are valuing the company at billions (which they can't control) is a testament to how fantastically they have executed.
I personally have seen Xero change from one of my riskiest investments to one that I'm very comfortable with.

[Xirr]

I personally rate it much less risky than it has been in the past. At IPO an investor took the risk that Xero would execute better than the incumbents and any number of startups. They have since shown that they can execute significantly better. They are smashing them convincingly.
The losses are minor in the scheme of things in my opinion. Their total accumulated losses of all time are only $155 million. That's less than the ACMR. It's less than half of the Lifetime Value of the customers that signed up in the last 12 months alone.
That is an extremely efficient use of $155 million dollars. The fact that outsiders are valuing the company at billions (which they can't control) is a testament to how fantastically they have executed.
I personally have seen Xero change from one of my riskiest investments to one that I'm very comfortable with.

A few things bug me about xero:
1. Churn concerns me - 17.6% pa across all countries is very high - 5-7% pa is the gold standard
2. Opex as % of revenue is very high
3. Revenue / employee is very low - I havent checked comparators but I would guess it is lower than most saas companies
4. It has probably the highest revenue to market cap of all saas companies I have ever seen - is xero the best saas company of all time - better than salesforce which had more than double the revenue per employee and could operate at a profit at the equivalent time?

As to external investors - really who knows why they have made the investments they have made. Its a bit of a cop out to invest on that basis. Sometimes investors don't really need a reason to invest and don't always ask the hard questions or do the research. But yes, some big scary people have put a lot of $$$ into Xero - I cannot deny that - they may well be right in the long run.

For me, I can't see value there and I am really worried about xero's ability to deliver profits sustainably.

I do think Rod has done a fantastic job creating a $2.8 billion company from nothing and I think the product is great. Good luck with your investment.

[lastmoa]

Craigs are rating it a SELL and have a price target south of $17.00 in 12 months time.
According to 4traders.com other analyst coverage shows 3 brokers rating it underperform and only one hold. Hardly a ringing endorsement is it !!
http://www.4-traders.com/XERO-LIMITED-10674803/consensus/

I find many (not all) brokers don't have a grasp on SAAS, or IT in any form, and thus, if they can't apply strict formula to the company they bleat 'Sell' Better to do that and stay with blue chips than risk putting your head on the ole chopping block. That's why I DMOR and back myself and top-up on these blessed dips.
Overall, hats off to Rod for creating what he has. Regardless of where this goes, he has helped lifted the profile of NZ IT, of which this is not the only NZ IT company that has world-beating potential. I shake my head at all the NZ'ers here who come out of the woodwork to have a quick dig at the slightest stumble. Better to get into the ring like Mr Drury has done thus far.

[Baa_Baa]

Craigs are rating it a SELL and have a price target south of $17.00 in 12 months time.
According to 4traders.com other analyst coverage shows 3 brokers rating it underperform and only one hold. Hardly a ringing endorsement is it !!
http://www.4-traders.com/XERO-LIMITED-10674803/consensus/

Thanks for the link Roger, those charts are telling, if you look at the result in isolation, while disappointing for some and Ok for others, it's a lot less informative than the looking at the trends. On balance it looks like the sp is pretty close to the consensus $19.

Roger, to give some due, try this link for a bunch of articles on why profit doesn't matter, or at least why it doesn't for Amazon. It's a strange business model but their share price is evidence that growth alone can sustain investor confidence for a lot longer than seems rational.
https://www.google.co.nz/?gws_rd=ssl#q=has+amazon+ever+been+profitable

[Baa_Baa]

But ultimately such a strategy IS irrational with no clear sign of profit in sight, yes?

Well NG it does seem so, but who can argue with amazing capital gain, even if it's not easily explained, though that assumes the gain is realised (sell), then you're not exposed to the gain. There's a conundrum. In a sustained bull market it seems to work just fine. When it doesn't it's ugly because there's no sustained return on investment, capital is decimated, and it's hard to get out unless your as sharp as. Take a look at AAPL by comparison, their SP is based on amazing growth AND sustained profits and returns to shareholders. Which would you rather have your $ invested in?

Bringing it home, take for example the XRO SP pop from $15 to $25 recently, on what. Nothing much really? A roadshow and announcing payroll functionality? The price just fed on itself and suddenly it's up $10 and no one really know why, except that it is.

Then equally so, XRO posts an aggregate 80%+ growth, which is what they forecast, and the SP declines $5. It's that uncertainty and unpredictability that makes it irrational. You wouldn't have any idea if you bought today whether you're going to lose or gain. In the long run I think XRO will be famous, but it has to be for the right reasons, or it's infamy.

That's why some of us bleat on about getting to profit, be like AAPL, grow like a madman but get to profit and share the rewards with your investors, even if it was for example by saying .. hey NZ and Aus are in profit, let's rewards our loyal shareholders, even a small titbit, while we plow the rest into UK and USA.

Not everyone has the coin to throw at a $20 stock on the promise that in X years (unknown cos there's no plan), there'll be an income for investors. That doesn't make us unpatriotic either. But then again, I don't think they need us small investors anymore, they have a stash from the big guys and while it might be frustrating for them having the minions nagging them, its the little guys that are 'valuing the company' in the market.

I'm sure they're happy with the market value, it's still two click above his latest capital raise. Rod even uses it as an example of why we should stop moaning about going to profits.

BAA

[Harvey Specter]

I'm suspicious of that slide in their Wellington building every time I see it. Built for someone to make a quick exit one day.

No requirement for analysis. Peter Lynch says use what you know and see. And he was one of the best.the slide is trademe's isn't it. Or are there 2

[Baa_Baa]

I personally rate it much less risky than it has been in the past. At IPO an investor took the risk that Xero would execute better than the incumbents and any number of startups. They have since shown that they can execute significantly better. They are smashing them convincingly.
... snip

JameSt, what makes your's a startling viewpoint, that you think it is "much less risky", is that XRO have basically quadrupled down on their successes, without realising any of the previous three wins for shareholders, expect in capital gains, which they have no control over, and aren't worth tuppence if the shares aren't sold. But they are smashing their competitors, pretty cool really but can they keep doing it?

We can't blame them for trying though, it's worked out pretty well so far, but it's not less risky, it's right back at the start, and way way more risky, and it's game-on in a scale of magnitude so much larger than any previous success.

Let me show you what I mean:

Boot 1 - Startup NZ - no real competitors, launch a cool product into the personal finance space, leverage that into the SME space, shaft the personal market (12,000 customers get fecked), SME's are all over it and subscribe = growth, making money but investing it in product improvement. Spot the opportunity elsewhere, defocus, let the market grow organically.

Boot 2 - Focus to Aus - no personal finance baggage, upshift functionality in the SME business space, go hard after MYOB, catch them unawares in the SaaS space, nice surprise, all good, except the ASX listing which hasn't made a wit of difference. Pump revenues and investment back into functionality and growing the market. Pile in resources to sustain growth.

Boot 3 - Focus to UK - ditto above but take on SAGE, everything scales up a notch or two. All good. Same model but hey, it's all still good, what luck SAGE didn't see us coming, SME's love us, the investors love it too, the IPO share price has been to $45 and has settled back to a modest $15. Keep pumping revenue and investment into product and market. The Shareholders won't mind, we're in it for the long game.

Boot 4 (reboot)(reboot) - Focus USA - it can't be much different can it? Hire a big wig, get on board some names with deep pockets, extend the functionality, go after Intuit. Oops, fire the big wig, bad choice. Re-boot. Another big name comes in with big bucks & connections & experience in SaaS growth companies yadda yadda. Oops our sales model can't be replicated. Re-boot. Let's keep sticking it to Intuit. Oops. We forgot that it's 8 years ago since we started loudly trumpeting SaaS accounting, maybe Intuit were listening and it's not going to be so easy to knobble the giant. FY15 Oops. 100% growth on f'all is still f'all. Crap. Don't worry though, despite our having no plan for profit, you should be ecstatic about our share price!

Summary. It's all bets on if you're a believer and a patriot. The USA is the prize. Xero is foregoing all successes of the past and piling all capital and revenues into the fourth dimension of their dream for global SME accounting domination, and THEN expansion into SME business big data, and and and.

It's an incredible story. But less risk, no I don't think so. This is the single most risky point in the history of XRO. You have to admire their confidence in their invincibility, but it's a lot less infectious than the past seven years. And the share price, and everything to-date, is based on a perception of potential for success in a market that XRO has barely made a scratch on that is dominated by a mean ugly giant that has seen them coming.

Go figure.
BAA

[RGR367]

the slide is trademe's isn't it. Or are there 2

Yeah only TradeMe got a slide or two. I'm not sure how many but XRO definitely got no slide of their own.

[tomblu]

Is it just me or is here something wrong with the page navigation on this thread, I cant seem to forward past page 433

[iceman]

That´s because 433 is the last page isn´t it ? I have seen same thing happen on several occasions on various threads


Is it just me or is here something wrong with the page navigation on this thread, I cant seem to forward past page 433

[RGR367]

That´s because 433 is the last page isn´t it ? I have seen same thing happen on several occasions on various threads

We're probably seeing or experiencing a so called "feature" (a bug in IT's term) on the Forum :)

[skid]

There is only one way to get to 434-----keep posting:):)

[couta1]

We're probably seeing or experiencing a so called "feature" (a bug in IT's term) on the Forum :)
Nothing new happens every now and again ive noticed.

[barleeni]

Is it just me or is here something wrong with the page navigation on this thread, I cant seem to forward past page 433

It might be that someone has deleted their account and with it their posts have disappeared? There is a gremlin on the Newby thread as well, Wallace D's 'Lets ask Wallace' thread has disappeared (along with him perhaps??!!)

[kizame]

I find many (not all) brokers don't have a grasp on SAAS, or IT in any form, and thus, if they can't apply strict formula to the company they bleat 'Sell' Better to do that and stay with blue chips than risk putting your head on the ole chopping block. That's why I DMOR and back myself and top-up on these blessed dips.
Overall, hats off to Rod for creating what he has. Regardless of where this goes, he has helped lifted the profile of NZ IT, of which this is not the only NZ IT company that has world-beating potential. I shake my head at all the NZ'ers here who come out of the woodwork to have a quick dig at the slightest stumble. Better to get into the ring like Mr Drury has done thus far.

Nobody is questioning how well Rod Drury has done with this company or by helping to put NZ IT on the map.
But as an investment right now,everyone has the right to have their opinion as to where it may be going from here,as it is yours and their hard earned bucks on the line.

[Everwood]

I reckon he have 3-4million customers by 2020 .... the difference between a 80% growth decay rate and a 70% one (calculated by geography with a one time subjective boost in NA in 2016)

If Xero did manage to get 3-4 million customers by 2020, what would be your estimated range for the share price?

[winner69]

Rods happy today, proudly announcing the arrival of his new baby on twitter

@roddrury: Hello baby

[RGR367]

Rods happy today, proudly announcing the arrival of his new baby on twitter

@roddrury: Hello baby I don't have one so I say it's one of those watches that will get superseded by another version soon :t_down: Ah the 1% of the 1 percenters.

[JamesST]

But ultimately such a strategy IS irrational with no clear sign of profit in sight, yes?

I don't think we're going to all reach consensus on this! Irrational to some. Rational to others. I feel like I'm sane but maybe I'm a crazy MOFO.

[Santiago]

I don't think we're going to all reach consensus on this! Irrational to some. Rational to others. I feel like I'm sane but maybe I'm a crazy MOFO.

I think the distinction here is between generating a profit and generating value. XRO is generating long-term value, not short-term profits. I think that is an efficient use of cash for the timebeing. I don't think we need hard and fast rules about the transition to profit as long as value is being generated. Ultimately the goal is to generate both at the same time (Apple!). It's up to the Board to decide when and how this transition should occur. If I were on the board, looking at their growth rates, I'd say "keep generating value". To tell them to look only at making a profit now would be a bad move, in my mind.

[winner69]

The baby is working -

@roddrury: Just said 'excuse me my Watch is ringing' in a presentation @VicsterNZ

[Daytr]

XRO is only creating value if it starts turning substantial profits.
I'm sorry I can't buy into any company that has no plan or time frame to turn a profit.
This is not Facebook, its a software provider that charges end users.
And that's not to say that it won't happen however I'm not going to jus sit & watch a guy spend up large with no time frames around making money especially when they have now been a round a while.
What a salesman this guy is. No accountability! Just trust me to keep lose money until one day we perhaps aren't.
Now there's a plan!

[macduffy]

Now here's a curious thing. Aussie competitor Reckon RKN jumped 5.6% today in an otherwise soggy market. Anything to do with the imminent listing of that other competitor, MYOB, or with XRO, I wonder?

[lubos]

Now here's a curious thing. Aussie competitor Reckon RKN jumped 5.6% today in an otherwise soggy market. Anything to do with the imminent listing of that other competitor, MYOB, or with XRO, I wonder?

Reckon goes on roadshow in a few days. See: http://go.reckon.com/roadshow2015/

[lastmoa]

Bloomberg article and video on the potential takeover of Salesforce.com
Relevant since most people do hold comparison with Xero and its growth path, albeit S/Force is further down the road.
But note the current $49 billion m/cap since this possibility made news.
http://www.bloomberg.com/news/articles/2015-04-29/salesforce-said-to-work-with-bankers-to-field-takeover-inquiries

[winner69]

Methinks Xero just told he ASX to take a running leap (ie get f####d or something)

https://www.nzx.com/files/attachments/212140.pdf

[Harvey Specter]

Methinks Xero just told he ASX to take a running leap (ie get f####d or something)

https://www.nzx.com/files/attachments/212140.pdf

Yes. This:


A reasonable person would not regard EBIT and NPAT figures as the key indicators

[winner69]

Yes. This:

Must be so frustrating for them when a lot of people and even the ASX just don't get it

You sense he grumpiness in the announcement

Believe the story

[Beagle]

XRO is only creating value if it starts turning substantial profits.
I'm sorry I can't buy into any company that has no plan or time frame to turn a profit.
This is not Facebook, its a software provider that charges end users.
And that's not to say that it won't happen however I'm not going to jus sit & watch a guy spend up large with no time frames around making money especially when they have now been a round a while.
What a salesman this guy is. No accountability! Just trust me to keep lose money until one day we perhaps aren't.
Now there's a plan!

Good post.


Methinks Xero just told he ASX to take a running leap (ie get f####d or something)

https://www.nzx.com/files/attachments/212140.pdf

XRO's arrogance is breath-taking.

[robbo24]

Good old XRO... Always good for a bit of how do you do trading :D

[winner69]

If Xero did manage to get 3-4 million customers by 2020, what would be your estimated range for the share price?

Probably worth about $15 to $22 but too many variables to really do any sums re profit (if any) or things like that. Can only punt on revenues eh.

It will still be a believe the story scenario ....unless Rod has executed his exit plan

[Beagle]

Exasperating, even.

I'd like to think ASX would wheel out some sanctions for their flagrant disregard for the long established rules.

I don't care if Rod thinks he's reinvented double entry accounting from 500 years ago or if he thinks he's the next Messiah of the investment world. Flagrant contempt for established listing rules needs to be forcefully condemmed. Suspending XRO's listing while a full investigation is undertaken would teach him a very much needed lesson. This guy appears to exist in his own fantasy world where long established market rules don't apply. The nerve of this guy to think he can re-invent listing rules that have served the market well for many decades.
I see the SP of XRO is down again...not impressed with Rod's gross arrogance, Gee there's a surprise !!, (NOT). It'll be back to $15 before Christmas, you read it here first.

[Baa_Baa]

Wellingtonians interested in a peek over the fence might like to attend this: http://iitp.nz/events/wellington/1120-MYOB_and_disruption_Adapting_to_an_Agile_and_Cloud _world

"For MYOB, which employs more than 1100 staff in New Zealand and Australia, the change required was huge; and was as much cultural as technical. With the transition now complete and the investment paying off (the majority of new registrations are cloud based), Simon will reflect on the transition: what worked, what didn't, and some of the lessons learnt along the way."

[RGR367]

.............not impressed with Rod's gross arrogance, Gee there's a surprise !!, (NOT). It'll be back to $15 before Christmas, you read it here first.

Their ASX reply maybe construed as bordering on arrogance but since I had the opportunity of working with Rod Drury before, arrogant is definitely not the word you'll use to describe him.
And by Christmas I hope the sp is back to very high 20's once again. Just my gut feel of course.

[winner69]

Ha ha Roger ......by Xero definition of 'reasonable person' you are NOT a reasonable person

[Beagle]

Ha ha Roger ......by Xero definition of 'reasonable person' you are NOT a reasonable person

Ha... how unreasonable of me to think its unreasonable for a company to make up whatever convenience interpretation of the rules they think is reasonable at their whim...AKA make up the rules as they go along. Traditional metrics don't apply to us, we're special...YEAH RIGHT...there's some nutter leader at Gloriavale sect that thinks he's special and normal rules of child molestation don't apply in his community... someone had me another Tui.

[JamesST]

JameSt, what makes your's a startling viewpoint, that you think it is "much less risky", is that XRO have basically quadrupled down on their successes, without realising any of the previous three wins for shareholders, expect in capital gains, which they have no control over, and aren't worth tuppence if the shares aren't sold.

Sorry to startle you but I respectfully disagree. I am seeing massive value creation being realised for shareholders.
The numbers are quite clear. They are making more money out of each customer over time than it costs to acquire them.
The P&L shows only up a loss because they can't recognise future revenue.
I certainly don't want dividends! Far from it.
If they could get access to cheap cash then I would expect them to get it and make even bigger short term losses. The main caveat to this is that they can't hire too fast and destroy the company culture and they can't risk getting too low on cash reserves.
Yes - This is risky. Future revenue may never eventuate if they lose their customers. But I use the product and have used the competitors - so I am confident on this front.

To me it is not even close to the risk of investing at IPO when they had no customers.



Boot 4 (reboot)(reboot) -

This is how you run a good business. Respond quickly when something doesn't work. The sustained revenue growth is a testament to how well run it is. You'd be hard pressed to find many examples of other companies (In any industry) with such prolonged revenue and customer growth.



FY15 Oops. 100% growth on f'all is still f'all. Crap.


f'all? 35,000 customers so soon after market entry isn't f'all in my books. They have got to 35000 customers much faster than they did in NZ, AU and UK. Good growth comes from word of mouth more than google ads. I was an early customer of Xero in NZ. I waxed lyrical to friends who owned businesses about it at BBQ's. 35,000 people in the US will wax lyrical about Xero at BBQ's. It will soon become 64000 businesses. I have no doubt.

In my eyes Xero is much less risky than at IPO.

[Baa_Baa]

Ha ha Roger ......by Xero definition of 'reasonable person' you are NOT a reasonable person

I think it's important to keep things in context, it was the ASX that first chose and used the words "reasonable person".

Their choice of these words and lack of definition diminished the credibility and impact of the lengthy communication from the ASX Listings Compliance Advisor, Kate Kidson.

"Listing Rule 3.1, which requires a listed entity to give ASX immediately any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities."

It was also clear in XRO's response that:

"Terms used, but not defined, in this letter have the same meaning given to them in your letter."

Hence it is spurious to attribute the word 'reasonable' or 'reasonable person' to Xero, when in fact they have used a word chosen by the ASX, with no definition provided.

In any other respect I think XRO have a good argument that their reporting methodology is more sound and reasonable in their case, than focusing on earnings.

Though for what's it's worth, that wouldn't convince me to invest in XRO at a share price that has no basis in fundamentals, and a company that has no plan for timeframe to achieve profit.

BAA

[Beagle]

Baa Baa - Rod's just herding the punters along an unknown dark path, (to capital destruction?) like a herd of mindless sheep Baaaa:p

[Jantar]

........
Though for what's it's worth, that wouldn't convince me to invest in XRO at a share price that has no basis in fundamentals, and a company that has no plan for timeframe to achieve profit.

BAA
I also do not understand how a company that pays no dividend, has NTA of $2.06, and has a negative earnings, can be valued by Mr Market at almost $20 per share.

[Baa_Baa]

Ok JamesSt, thanks for replying, I'll agree to disagree, we have differing viewpoints.

BTW, I also use Xero Business as a matter of interest and I like the product but am not happy about the recurring monthly costs, forever, which are only marginally offset by the reduction in my accountants fees, assuming I personally put the effort into correctly coding my expenses.

But that aside, I cannot see how to realistically value the company, or ergo it's share price, and therefore cannot justify taking an investment risk in a $20 head share, which can and does turn on a dime, based on the emotional buy-in to XRO's confidence of success.

I don't think it is an unreasonable ask of an investor for Xero to develop a plan for profitability, it is a relatively simple equation of realising success in the markets that are successful and progressively converting those to earnings and beginning to rewards investors, while piling the seed capital into the pure growth markets.

Without that, it's a crap shoot buying a stock that may or may not increase in value, is now pinned to the USA success story which is far from guaranteed, is extremely volatile on low liquidity and could quite as easily destroy investor value as increase it.

I do believe the story, I just won't buy it, on the current investment management policies.

BAA


Sorry to startle you but I respectfully disagree. I am seeing massive value creation being realised for shareholders.
The numbers are quite clear. They are making more money out of each customer over time than it costs to acquire them.
The P&L shows only up a loss because they can't recognise future revenue.
I certainly don't want dividends! Far from it.
If they could get access to cheap cash then I would expect them to get it and make even bigger short term losses. The main caveat to this is that they can't hire too fast and destroy the company culture and they can't risk getting too low on cash reserves.
Yes - This is risky. Future revenue may never eventuate if they lose their customers. But I use the product and have used the competitors - so I am confident on this front.

To me it is not even close to the risk of investing at IPO when they had no customers.


This is how you run a good business. Respond quickly when something doesn't work. The sustained revenue growth is a testament to how well run it is. You'd be hard pressed to find many examples of other companies (In any industry) with such prolonged revenue and customer growth.



f'all? 35,000 customers so soon after market entry isn't f'all in my books. They have got to 35000 customers much faster than they did in NZ, AU and UK. Good growth comes from word of mouth more than google ads. I was an early customer of Xero in NZ. I waxed lyrical to friends who owned businesses about it at BBQ's. 35,000 people in the US will wax lyrical about Xero at BBQ's. It will soon become 64000 businesses. I have no doubt.

In my eyes Xero is much less risky than at IPO.

[Baa_Baa]

Baa Baa - Rod's just herding the punters along an unknown dark path, (to capital destruction?) like a herd of mindless sheep Baaaa:p

I hear the bleating from here, I just hope the farmer isn't going to put their rear hooves in his gumboots, as they say on the farm.

BAA

[Baa_Baa]

I also do not understand how a company that pays no dividend, has NTA of $2.06, and has a negative earnings, can be valued by Mr Market at almost $20 per share.

Neither do I. The SP is all witchcraft and here say, and I think Rod would have done the company proud by clearly stating their plan to achieve profit and timeframe, but chose to 'Amazon it', and treat the shareholders the same way as they stuck it to the ASX today. It just beggars belief.

[winner69]

I owe Roger and Xero an apology over confusion of what reasonable means.

Roger is a reasonable person

[JamesST]

But that aside, I cannot see how to realistically value the company, or ergo it's share price, and therefore cannot justify taking an investment risk in a $20 head share, which can and does turn on a dime, based on the emotional buy-in to XRO's confidence of success.

Fair enough. I don't bother trying to value the company. And not sure I'd invest at current share price either.


I don't think it is an unreasonable ask of an investor for Xero to develop a plan for profitability, it is a relatively simple equation of realising success in the markets that are successful and progressively converting those to earnings and beginning to rewards investors, while piling the seed capital into the pure growth markets.
BAA
i think it would be dangerous for them to give guidance on profitability.
They are realising success with every customer they add. They're rewarding investors with every customer they add.
i don't understand your argument? Are you saying that a shareholder would be better off if the company slowed down customer growth to enable dividend payments?

[Jantar]

....
They are realising success with every customer they add. They're rewarding investors with every customer they add.
i don't understand your argument? Are you saying that a shareholder would be better off if the company slowed down customer growth to enable dividend payments?
Dad and Dave made their annual pilgrimage from the outback into Brisbane and were shocked to discover that watermelons were selling for $5 each. They knew they could buy them in Gomeri for $1 each and so decided they could get rich selling watermelons. The next weekend they hired a truck and bought a load of melons for $1 each and drove to Brisbane. They set up at they side of the road with a sign saying "Watermelons: $1.00 each". Within an hour they had sold out. They did the same the following weekend, and the one after.
After a month Dad said to Dave "We are doing great business, but we're not making much money."
Dave replied "You're right. We need to grow our customer base. Lets hire a bigger truck."


If XRO does not have a profitable business model, then having more customers just means bigger losses.

[JamesST]

Have you actually read the results or investor presentation? I don't think you are quite grasping the subscription model.


Dad and Dave made their annual pilgrimage from the outback into Brisbane and were shocked to discover that watermelons were selling for $5 each. They knew they could buy them in Gomeri for $1 each and so decided they could get rich selling watermelons. The next weekend they hired a truck and bought a load of melons for $1 each and drove to Brisbane. They set up at they side of the road with a sign saying "Watermelons: $1.00 each". Within an hour they had sold out. They did the same the following weekend, and the one after.
After a month Dad said to Dave "We are doing great business, but we're not making much money."
Dave replied "You're right. We need to grow our customer base. Lets hire a bigger truck."


If XRO does not have a profitable business model, then having more customers just means bigger losses.

[Beagle]

I owe Roger and Xero an apology over confusion of what reasonable means.

Roger is a reasonable person

Thanks mate that's very nice of you to say but just to clarify...I wasn't annoyed at you, I was just having a good bleat about XRO's arrogance which simply put, isn't right.

http://www.sharechat.co.nz/article/6a360a02/xero-tells-asx-that-profit-is-wrong-metric-to-measure-business.html?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Friday+1+Ma y+2015

I will just add this. Early stage Saas company, really ???, its been going nearly 10 years now !! Its extremly rare to see a consensus SELL recommendation from five professional analysts. I guess if people are determined to believe the creative sell that Rod keeps pushing then...

[RGR367]

Let me paint pictures that are emerging here on this thread why some would not really bother investing. One is with those who did not get in into its IPO. Another is with those who still failed to buy low and now found the price too high. And the last is with those who are inkling to buy into it if only they can understand the company especially any report presented to them. So on what picture do you want to belong? Just asking.



disc: I belong to yet another picture of those who bought low and sold high and I don't care if it goes to liquidation tomorrow. But by the God of Asgard my Gut tells me we're into something here so I'm leaning more into the company story camp. I don't do or understand charting and got a shallow knowledge on Fundamentals.

[Cricketfan]

And the last is with those who are inkling to buy into it if only they can understand the company especially any report presented to them.

Assuming you believed in the company, is it still worth buying at current prices (or holding, if you bought in at current price)? Let's say in 5 years everything Rod is hoping for comes to fruition, what would the share price be then compared to now? Double? Triple? Or could it be more? If it's 'only' double or triple, are there not many other stocks that could also double or triple in that timeframe but with less risk?

Disc: Currently hold a small amount of XRO.

[Jantar]

..... One is with those who did not get in into its IPO. Another is with those who still failed to buy low and now found the price too high. And the last is with those who are inkling to buy into it if only they can understand the company especially any report presented to them. So on what picture do you want to belong? Just asking......
And the 4th one is those who are looking for investment opportunities, see that the fundamentals are poor, that XRO has no real earnings, and the asset backing is only 1/10th of the SP, so decide to look elsewhere.

[Harvey Specter]

Dad and Dave made their annual pilgrimage from the outback into Brisbane and were shocked to discover that watermelons were selling for $5 each. They knew they could buy them in Gomeri for $1 each and so decided they could get rich selling watermelons. The next weekend they hired a truck and bought a load of melons for $1 each and drove to Brisbane. They set up at they side of the road with a sign saying "Watermelons: $1.00 each". Within an hour they had sold out. They did the same the following weekend, and the one after.
After a month Dad said to Dave "We are doing great business, but we're not making much money."
Dave replied "You're right. We need to grow our customer base. Lets hire a bigger truck."


If XRO does not have a profitable business model, then having more customers just means bigger losses.But the next month, for some reason those same customers deposit another $1 into their account, even though the farms supplied nothing new. THey kept quiet, not wanting to upset their new golden goose which for some reason deposited another $1 every month for ever.

As Baa Baa says:


I also use Xero Business as a matter of interest and I like the product but am not happy about the recurring monthly costs, forever,

[winner69]

Creating shareholder value

Xero has created heaps - more than $2.7 billion worth

Shareholders have fronted up with $492m of cash. That was worth $3.2 billion as at March 31st on the market.

Even the guys who fronted with $20 a share a month or so ago aren't really underwater. All other shareholders who have fronted up with real cash have done really well.

Table is how this has progressed over the years

The real providers of capital (investors) have done well, maybe the majority of those who trade prices (ie buy an existing share off someone else and call themselves investors in Xero) are the mugs in this game. Exception are those who bought earlier than a couple of years ago and still hold ..... they not mugs

[winner69]

PS - Mind you those real investors aren't as rich as a year ago

[RGR367]

Assuming you believed in the company, is it still worth buying at current prices (or holding, if you bought in at current price)? Let's say in 5 years everything Rod is hoping for comes to fruition, what would the share price be then compared to now? Double? Triple? Or could it be more? If it's 'only' double or triple, are there not many other stocks that could also double or triple in that timeframe but with less risk?

Disc: Currently hold a small amount of XRO.

As Roger said above and I quote, "I guess if people are determined to believe the creative sell that Rod keeps pushing then..." you buy for all its worth whether today or tomorrow. It's your call really.
But I don't think you need to wait for 5 years to know whether you paid right for it or not. I think this will boil over in 2 or 3 years at most. As for fruition, maybe you need to check on Intuit from its beginnings because its sp now is about $100.

[Beagle]

XRO invents new disclosure rule - one off costs don't count towards the 15% variance from analyst expectations. Cool - all those mining companies dont have to disclose their plans to write down their assets, as its a one off. Insurance companies no longer have to disclose losses from 100 year floods and cyclones, because they are a one off.

Well I have a message to XRO - the entire point of the early disclosure rule is to highlight these massive unexpected changes in business operations, not just slow deterioration in operating revenues and profits. Get a grip XRO, blatantly ignoring the ASX rules will not find you friends in the investment community. I dont think the US SEC would take such a response to failing to comply with SEC disclosure rules (which clearly apply to variance from analyst expectations).

Very well said, a one fingered salute to the investment community...who are they taking public relation and compliance lessons from, Ports of Auckland lol
Eagle eyed followers will have noticed its just broken down through the 100 day moving average so technically looking really weak.

[winner69]

Next they will be recognise future income in the current P&L and report huge profits.

Now, did I see that function in the beautiful accounting package. I think I did

[RGR367]

It would be nice to know those customers having more than 100 payroll employees by 1 July 2015 because of this http://www.digitalfirst.com/2015/04/29/xero-adds-employee-limits-top-pricing-plan

[Daytr]

A couple of points re recent posts & XRO latest.
The point of the ASX letter was this. Was the news of increased loss price sensitive? It clearly is & the SP is reflecting that.
XRO's response is either showing arrogance & I might add to the wrong entity, you don't want to get these people offside. Or its naivety.
Increased loss is suggesting that costs are growing faster than revenue, this is SP sensitive.

One poster says there are only a couple of types of people on this thread. Those who missed out, those who bought & those who don't understand it. Well there is a fourth, those who understand it & clearly saw it as over valued & the SP again is reflecting this.

On a positive note it is now better value than it was, but imo still over priced, but just not as much as it was.

[Harvey Specter]

It would be nice to know those customers having more than 100 payroll employees by 1 July 2015 because of this http://www.digitalfirst.com/2015/04/29/xero-adds-employee-limits-top-pricing-planMy understanding is the the payroll function is relatively basic. As such, if you have 100 employees, you are more likely already using a specialist payroll provider - at least in the NZ market. The overseas versions may be different.

[mikeybycrikey]

I've been travelling for a few days so haven't had a chance to contribute to this thread.

I find it interesting that there are still people out there that have absolutely no faith in the execution of Xero. This is a company that now has close to half a million customers, each paying about $30 per month for a service that they consider useful. Yet some commenters here are adamant that Xero is a house of cards that will come tumbling down and Rod Drury is a con artist.

I find the focus on profit by detractors to be very odd too. "Tell us when you'll make a profit?", they say.

If you can't see how it might be possible for Xero to be profitable if they were to have 2 million, 5 million, or 10 million customers, then clearly you consider Xero to be worthless and there is not point in even contributing to this thread.

Some people are treating Xero as if they have no plan at all for profit. That there is no possibility at all that they will ever make a profit. I don't subscribe to this opinion. I'm pretty sure there will be detailed modelling within Xero of the next few years as they grow the company and head towards profit. (Whether they survive that long is a different matter).

Looking through the annual results, I'm a little surprised by the big drop in the share price. There is nothing in here that was surprising to me, especially given the size of the Australian market was announced on 31/3. Of the five main markets, (NZ, Aus, UK, US, RoW), I correctly estimated the subscriber numbers in three of them, Xero announced Australia, and I should've revised down my UK figures given the Aus figures were lower than expected.

To put that another way, I would've expected the price to drop following the announcement of 200k Aus subscribers on 31/3 (I had estimated 217k) rather than with the Annual results. This obviously doesn't factor in the departure of the CFO which I do consider to be a problem and worthy of a price drop.

In terms of achieving profitability, there are three things Xero is spending money on: running the business, growing the software, and growing the customer base. Only the first of those expense groups relates to just the current year. I believe that growing the software and growing the customer base are expenses where the benefits will accrue over multiple years. They are investing for the future and it is acceptable to me that this should cause losses for now.

And finally, in response to Jantar who is complaining about the lack of tangible assets: this is a software business. Not a factory. Tangible assets don't matter at all. A software company like Xero can service 500,000 customers or 50,000,000 customers with the same amount of NTA. This is even more irrelevant, since (as far as I'm aware not being an accountant) isn't the software itself an intangible asset?

My current expectation is that Xero should be profitable in about 18 months. Growth is slowing a little quicker than I would like so profitability might take two to two and a half years. Getting growth ramped up in US and UK is important to justify the current SP and get to profitability.

[winner69]

Bloody recruitment agencies ....an suppose being punched in the face than having your pony tail pulled

http://www.sharechat.co.nz/article/0ad06782/xero-changes-recruitment-tactics-as-unsuitable-us-head-cfo-depart-drury-says.html?utm_medium=email&utm_campaign=Xero+changes+recruitment+tactics+as+u nsuitable+US+head+CFO+depart+Drury+says&utm_content=Xero+changes+recruitment+tactics+as+un suitable+US+head+CFO+depart+Drury+says+CID_655c8e5 4140bc2806cf1c0bec3da72ba&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle0ad06782xero-changes-recruitment-tactics-as-unsuitable-us-head-cfo-depart-drury-sayshtml


Xero changes recruitment tactics as unsuitable US head, CFO depart, Drury says
Friday 1st May 2015
Text too small?
Xero boss Rod Drury says the accounting software developer has changed its tactics for hiring senior executives after the departure of a US chief executive who lacked urgency and a chief financial officer who didn’t like to travel.

The departure of former North American CEO Peter Karpas in September, after six months in the job, and last week’s announcement that US based CFO Douglas Jeffries has left after just six weeks, unsettled investors. The shares dropped to a two month low following news of Jeffries’ departure and the company’s annual results, prompting the ASX to ask Xero if it was complying with disclosure rules.

Drury says Karpas ticked all the boxes, having worked at both larger rival Intuit and run Paypal’s small business arm in the US, but he didn’t have the “urgent start-up mentality.”

“The performance wasn’t there, the numbers weren’t there, boom,” Drury told BusinessDesk. With Jeffries, the former CFO himself realised he had taken the wrong job.

“Within two months of him travelling around he realised it wasn’t for him,” Drury said. “He wanted to be in a business where all the chief executives were based in San Francisco. That’s not our business.”

“It’s unfortunate he didn’t realise that in the beginning because it’s like coming into our business and setting a bomb off, but it really has no impact. It is a perception thing.”

The mis-hires have prompted Xero to rely less on recruitment agencies for top executives and more on its own networks and shareholders, which include seasoned Silicon Valley venture capital firm, Accel Partners and Matrix Capital Management who contributed $147.2 million in equity capital in February. The company also taps the networks of its directors like Salesforce CFO Graham Smith and Hewlett-Packard executive Bill Veghte.
“What we found is when we get people from a recruitment process and not through our networks it is not as good, and the chemistry wasn’t there, so better to work that out now and deal with it than not,” Drury said. “It’s eyes wide open because we don’t want to get another one.”

The US is the smallest of the company’s four key markets behind Australia, New Zealand and the UK, but its fastest growing. In the year through March, its US customer base grew 94 percent to 35,000. The country has an estimated 24 million small businesses.
Xero has been forced to adjust to a more direct marketing model in the US, where many small and medium sized businesses do their own accounts rather than outsource the work in what is a more litigious market where accountants tend to focus more on compliance issues, Drury said. More than half of its US customers now subscribe directly through the xero.com website, which has been simplified for end users.

By contrast, accountancy firms have been an important catalyst to sales growth in Australia and New Zealand, alerting clients to Xero’s easy to use, cloud-based service.

Drury says Xero is still eyeing a Nasdaq listing as a way to boost its US profile. The company has reached one of its own pre-conditions, achieving more than US$100 million in annualised revenue, but would prefer to wait until it had gained more traction against rival Intuit in terms of winning customers.

Globally, Intuit has 841,000 subscribers to its QuickBooks online accounting software, compared with Xero’s 475,000 customers.
Xero also plans to strengthen its push in the US by partnering with global brand companies such as Google, Microsoft, Amazon, Wells Fargo, Bank of America, Visa, Mastercard, Verizon and Sprint. It hired former Microsoft executive James Maiocco as head of business development in November to help clinch the deals.
“We are nailing these big partnerships, so we don’t have to build our brand on our own, that’s a very logical strategy for a new entrant coming into a market,” Drury said

Xero told the ASX this week that it was in compliance with listing rules after being asked whether it telegraphed a 96 percent blow-out in its full year net loss as soon as it became aware of the deterioration. In its response, Xero said it didn’t regard profit as the right measure of performance for an early stage, high growth, loss making, software as a service company.

Drury emphasised that view at the two day Xerocon conference in Auckland this week.

"If someone comes up and says when will you guys make a profit, I’m going to punch you in the face because we have a quarter of a billion in cash to invest,” Drury said. “Our investors don’t want us to put it in the bank, they want us to grow and hire so we build a much higher value business later.”

At March 31, the company had $268.9 million of cash. Drury said the company may reach $1 billion of revenue in four to five years, saying it is much harder to get from nought to $100 million than to make the next step to $1 billion.

“We think somebody needs to create the Facebook sized company in small business, it could be us,” Drury said. “This is the biggest monetisable opportunity on the web. We feel confident. We think we have got a real shot at being that hugely global significant company.”

The company’s shares last traded at $19.90, compared with its 2007 initial public offering at $1 apiece, and a record high of $45.99 in March last year.

[robbo24]

Wait, people are bitching about the use of "reasonable person" in the ASX request?

Jeepers, its only the most commonly used phrase in law, and hence well understood and meaningful.

Condolences to holders. Rod seems more deluded than hitler, and we all know what happened to him...

Amen - although it is funny to watch laypeople flounder about with their idiosyncratic interpretations of such iceburgs :D

[Daytr]

That's quite an extreme view that I haven't seen anyone espouse, so your interpretation of posts that are contrary to shareholders is far different from mine.
1) its a bit hard for a company that goes broke that has cash in the bank.[
2) there is a very big difference in saying a company is over valued & under performing compared to valuation, than its going broke.

Cheers Daytr

QUOTE=mikeybycrikey;570461]I've been travelling for a few days so haven't had a chance to contribute to this thread.

I find it interesting that there are still people out there that have absolutely no faith in the execution of Xero. This is a company that now has close to half a million customers, each paying about $30 per month for a service that they consider useful. Yet some commenters here are adamant that Xero is a house of cards that will come tumbling down and Rod Drury is a con artist.

I find the focus on profit by detractors to be very odd too. "Tell us when you'll make a profit?", they say.

If you can't see how it might be possible for Xero to be profitable if they were to have 2 million, 5 million, or 10 million customers, then clearly you consider Xero to be worthless and there is not point in even contributing to this thread.

Some people are treating Xero as if they have no plan at all for profit. That there is no possibility at all that they will ever make a profit. I don't subscribe to this opinion. I'm pretty sure there will be detailed modelling within Xero of the next few years as they grow the company and head towards profit. (Whether they survive that long is a different matter).

Looking through the annual results, I'm a little surprised by the big drop in the share price. There is nothing in here that was surprising to me, especially given the size of the Australian market was announced on 31/3. Of the five main markets, (NZ, Aus, UK, US, RoW), I correctly estimated the subscriber numbers in three of them, Xero announced Australia, and I should've revised down my UK figures given the Aus figures were lower than expected.

To put that another way, I would've expected the price to drop following the announcement of 200k Aus subscribers on 31/3 (I had estimated 217k) rather than with the Annual results. This obviously doesn't factor in the departure of the CFO which I do consider to be a problem and worthy of a price drop.

In terms of achieving profitability, there are three things Xero is spending money on: running the business, growing the software, and growing the customer base. Only the first of those expense groups relates to just the current year. I believe that growing the software and growing the customer base are expenses where the benefits will accrue over multiple years. They are investing for the future and it is acceptable to me that this should cause losses for now.

And finally, in response to Jantar who is complaining about the lack of tangible assets: this is a software business. Not a factory. Tangible assets don't matter at all. A software company like Xero can service 500,000 customers or 50,000,000 customers with the same amount of NTA. This is even more irrelevant, since (as far as I'm aware not being an accountant) isn't the software itself an intangible asset?

My current expectation is that Xero should be profitable in about 18 months. Growth is slowing a little quicker than I would like so profitability might take two to two and a half years. Getting growth ramped up in US and UK is important to justify the current SP and get to profitability.[/QUOTE]

[Beagle]

I was headhunted to the CFO role at a large private enterprise in 1987 and left after three months. Any CFO worth his salt wants to see the company they're working for thrive and help the company become very successful.
The CEO was delusional, had extremely poor communication skills, an exasperating lack of financial discipline, (e.g. he airfreighted in the latest V8 Holden from Australia for goodness sake because he couldn't wait for normal shipping...back in 1987 the latest new release Holden was a big deal, my how times have changed lol), ruled with an iron fist on a divide and conquer basis e.t.c. Once inside and having had a good look at the systems, procedures and having obtained a through understanding of their business plan, if you could call it a plan, it was clear the group of companies was headed for a showdown with commercial reality. 1987 was a crazy time. 2001 was a crazy time in the tech world, history repeats.

Notwithstanding all the challenges of dealing with such an individual the main reason I left is I was sure this wasn't good for my career and I was virtually certain the company would go under in the medium term and sure enough it did less than eighteen months later. Just thought I'd share part of my early career story for what its worth.

"Stories" of people leaving because they don't have the right mind-set or didn't fit the culture of the organisation or didn't like travel are just a complete load of B.S. People don't sabotage their own careers without a profoundly good reason or three. I suspect many of the people hot on this stock weren't even born in 1987, were too young to invest in the tech wreck of 2000-2001.
Seems to me every generation that comes along forgets to bother to learn anything from history. Wakey, wakey, history repeats !!

[winner69]

MYOB float a great success. Got $3.65 a share

Market cap 2.1 billion .....less than Xero

http://www.smh.com.au/business/markets/myob-raises-833m-in-australias-biggest-ipo-of-2015-20150501-1mxj2w.html

[winner69]

Heard this guy on TV tonite saying he has done well over the last 7 years and that surplus is no th far off. Hen another guy said he must be suffering from delusions (or something lie hat)

Thought it was Rod but then looked up it and it was Bill

Seems they both have the same strategy - keep borrowing (raising capital) and that surplus (profit) will come ....one day, be patient

Believe the story

[winner69]

That article about Rod punching people in the face

His reaction to the Herald having it

@roddrury: May as well have fun with it

[Bilbo]

Time for a contrary view.

Xero keep executing as planned, and when they misstep they fix it quickly. As a long term shareholder I could not be more happy. I remember people saying Google was overvalued ten years ago at $100 a share. Look at it now.
http://blogs.wsj.com/moneybeat/2014/08/19/googles-ipo-10-years-later-just-10-stocks-beat-it/

Rod has always aimed big with Xero and never been shy to admit it. All the big tech heavyweights had years of losses. Xero is becoming ingrained as THE small business accounting system in NZ/AU and UK. I hear people mentioning they use it or intend to use it all the time. People looking for jobs are wanting to learn Xero so they can put in on their CVs etc as it is a necessary skill for admin/office manager roles.

Growth in the US will take time, but I'm confident it will happen, and when it starts to take hold there will be no holding this baby back.

Just my opinion, but one that I consider to be reasonable. DYOR.

[Bilbo]

Just a little snippet of some of the great stuff Xero are doing which is entwining their brand into others:

From http://bizedge.co.nz/story/new-features-and-global-strategy-xero/

"Integration with Microsoft Office 365

Drury also announced the integration of Xero with Office 365, Microsoft’s cloud-based productivity suite. The integration includes a dedicated Xero feed straight through to Office 365, allowing customers to access Xero and Practice Manager data directly from within Microsoft Outlook.

“Business tools today are smarter and more connected than ever, so Xero is continually embracing new opportunities to provide better connectivity for our small business customers,” Drury says. “This integration with Microsoft will extend even further the reach and usability of Xero software and allow us to connect with even more of the market.”

Microsoft New Zealand managing director, Paul Muckleston, welcomed the announcement, saying that the integration is especially good news for Kiwi SMBs.

“New Zealand small businesses are adopting Office 365 faster than any country in the world. With Xero now deeply integrated into the Office 365 experience, customers will experience an even greater boost to productivity in the SMB workplace,” he says.

The integration will be live in the Microsoft Office Store by the end of May 2015."

[robbo24]

Well I hope you all know that Moosie_900/BFG says come next week XRO is going to bounce and you're all going to be shown the glory of its shareprice.

Moosie_900/BFG relies on the hammer formation on the SMA100 (http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=nz%3Axro&x=30&y=20&time=8&startdate=1%2F4%2F1999&enddate=5%2F1%2F2015&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=4&maval=50%2C100%2C200&uf=0&lf=1&lf2=0&lf3=0&type=4&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11).

I personally do not care - but I figure if I get this out in the open then he'll stop bothering me about it via WhatsApp :D

[Baa_Baa]

Well I hope you all know that Moosie_900/BFG says come next week XRO is going to bounce and you're all going to be shown the glory of its shareprice.

Moosie_900/BFG relies on the hammer formation on the SMA100 (http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=nz%3Axro&x=30&y=20&time=8&startdate=1%2F4%2F1999&enddate=5%2F1%2F2015&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=4&maval=50%2C100%2C200&uf=0&lf=1&lf2=0&lf3=0&type=4&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11).

I personally do not care - but I figure if I get this out in the open then he'll stop bothering me about it via WhatsApp :D

It's not a hammer, it's a dragon fly dogi, which is a lot less reliable: "The reversal implications of a dragon fly doji depend on previous price action (uh that's down in case you haven't noticed) and future confirmation (which uh, hasn't happened yet cos we are not in the future yet) which if you interpret carefully shows how useless the dragon fly dogi is being a lagging candle. The long lower shadow provides evidence of buying pressure, but the low indicates that plenty of sellers still loom." Buy this share based on a dragon fly doji on big charts (like that's a reliable source for chart analysis ROTF) and you could just lose a bit or a lot more of your shirt. What people might have seen is a gap up closed (20.5-21.5), with modest support at $19 (the gap down Oct'14 and spike high Nov'14), otherwise it's free fall to $16 or so. JMHO, DYO chart analysis.

[robbo24]

It's not a hammer, it's a dragon fly dogi, which is a lot less reliable: "The reversal implications of a dragon fly doji depend on previous price action (uh that's down in case you haven't noticed) and future confirmation (which uh, hasn't happened yet cos we are not in the future yet) which if you interpret carefully shows how useless the dragon fly dogi is being a lagging candle. The long lower shadow provides evidence of buying pressure, but the low indicates that plenty of sellers still loom." Buy this share based on a dragon fly doji on big charts (like that's a reliable source for chart analysis ROTF) and you could just lose a bit or a lot more of your shirt. What people might have seen is a gap up closed (20.5-21.5), with modest support at $19 (the gap down Oct'14 and spike high Nov'14), otherwise it's free fall to $16 or so. JMHO, DYO chart analysis.

Let me help you out here Baa_Baa.

Firstly, it's always good to quote in entirety or to signify omissions with ellipses. It is also essential to reference your information. So, the quote you misleadingly plagiarised is from Stockcharts.com in an article called Introduction to Candlesticks (http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introducti on_to_candlesticks). The full quote says:


Dragon fly doji form when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a “T” with a long lower shadow and no upper shadow. Dragon fly doji indicate that sellers dominated trading and drove prices lower during the session. By the end of the session, buyers resurfaced and pushed prices back to the opening level and the session high.


The reversal implications of a dragon fly doji depend on previous price action and future confirmation. The long lower shadow provides evidence of buying pressure, but the low indicates that plenty of sellers still loom. After a long downtrend, long black candlestick, or at support (http://stockcharts.com/school/doku.php?id=chart_school:glossary_s), a dragon fly doji could signal a potential bullish reversal or bottom. After a long uptrend, long white candlestick or at resistance (http://stockcharts.com/school/doku.php?id=chart_school:glossary_r), the long lower shadow could foreshadow a potential bearish reversal or top. Bearish or bullish confirmation is required for both situations.




Now, as a master trader such as yourself knows it's fine to task risks as long as you mitigate them. Like when you were hoovering up VML shares in the mid 2 cent range, I am certain you would have set rigid stoplosses in case the shareprice reached what it has over the last few days. Moosie is welcome to task his risks. XRO is ripe for a bounce.

You are also critical of Bigcharts.com. I'm not sure how any other charting programme would display a doji any differently. I'm not sure how displaying SMA 50, 100 and 200 would be significantly different on any other charting programme.

As a side note, let's not be too critical of Bigcharts.com - you are no expert on charting software, as per our PM discussion when you asked me about charting software on 27 March 2015:


Baa: Hi, good fun on the VML thread eh. Just wondering what chart/platform you're using, if you don't mind saying. I'm looking at Metastock. cheers BAA
Rob: Best software, but by no means the cheapest, I have found for ASX/NZX is Iguana 2 Spark. Give the 14 day trial a go.
Baa: Thanks robbo, it certainly looks interesting, appreciate your suggestion, cheers, BAA

:D

[Beagle]

And this - "Xero said it didn’t regard profit as the right measure of performance"
Again, lets tell the entire financial and investment world what performance measures are acceptable to the company for them to use. Measuring losses doesnt count (I bet there are hundreds of loss making companies out there that would love the market to stop tracking their losses. Especially when they are just about to do a capital raising.

And this clanger 'we didnt make any earnings guidance" so therefore we are not obliged to correct any earnings assumptions. They just shot the whole of Wall St down with that one.

I think they are living on their own planet where they see the sky is green.



ASX Listing Rules - Guidance Note 8 - I suggest Drury familiarises himself with it.
Specifically that a company must disclose if earnings will be materially different from market expectations (considered by the ASX to be 10-15% variance). A company that does not issue earnings guidance is still obliged to provide disclosure where "it is covered by sell-side analysts, and those analysts have issued earnings forecasts" (yes, its there in black and white).

http://www.asx.com.au/documents/rules/gn08_continuous_disclosure.pdf


So long as it lasts long enough for management to sock away a few mortgage free mansions, a couple of supercars, and a tidy investment portfolio that they can live comfortably on for the rest of their lives, then its all good. Dont worry about the little people who lose their life savings.

Hits the nail squarely on the head. The only thing you forgot was the Riviera motor launch. :)

[winner69]

Apple watches and Xero working together ....linking apps as Rod says.

WOW, imagine that

Believe the story

[Daytr]

I see a lot of references to other very successful dot com businesses like Google, Facebook etc. But for every incredibly successful dotcom there are 90+ who crash & burn. Any reference to them. I'm not saying XRO will crash & burn, but this is the sort of odds you are up against. Remember when Yahoo was up with Google for instance? When was the last time you Yahooood? Or logged into Myspace?

[Baa_Baa]

Is Xero still a hero? http://www.stuff.co.nz/business/industries/68195961/is-xero-still-a-hero

[winner69]

Is Xero still a hero? http://www.stuff.co.nz/business/industries/68195961/is-xero-still-a-hero

Of course they are still heroes

Some 3 million customers in 2020 at say $400 a year and 70% Gross Margin and $200m a year to keep running and even after tax that's heaps and heaps of earnings .... at least $400m. A 20 times earnings and discounted back to today dollars is more than $20 a share

Believe the story

[RGR367]

Is Xero still a hero? http://www.stuff.co.nz/business/industries/68195961/is-xero-still-a-hero

Like a lot of heroes, XRO probably has to die first to be accepted a hero. So no matter what, it will still become a true Hero. It is already on my book :t_up: and it may even do a reboot, join the League of Super-Heroes and truly become a Super One :D

[Daytr]

So you are saying that they are significantly over valued right now, but in five years maybe worth something like they are now.

Of course they are still heroes

Some 3 million customers in 2020 at say $400 a year and 70% Gross Margin and $200m a year to keep running and even after tax that's heaps and heaps of earnings .... at least $400m. A 20 times earnings and discounted back to today dollars is more than $20 a share

Believe the story

[winner69]

So you are saying that they are significantly over valued right now, but in five years maybe worth something like they are now.

didn't I say ....... discounted back to today dollars is more than $20 a share

[kizame]

didn't I say ....... discounted back to today dollars is more than $20 a share
So $22 then, You could have also said more than 30 or 40, Thats what he meant.
I can't really see value at that rate,crikey RYM is a better bet.

[Baa_Baa]

Wow, after extracting the knives from my back I pondered the vehemence and how a private message can be used against you even when the conclusions drawn from it cannot be discovered in the message. Let alone other spiteful accusations, I really think it's better just to let it go, people will make up their own minds as I don't think it will help stooping to a slug fest, else the greater slug wins.

I thought instead that I'd share a chart which some XRO investors might find interesting, perhaps even helpful. Though I have never professed to be an expert chartist, I do use price charts to inform my investing. You can probably replicate and tweak this chart if you like it, on Big charts, Yahoo finance charts or Google finance charts, but I use Incredible Charts, as it's worked well for me for the past 15 years.

The weekly XRO price chart takes a lot of noise out of the price action, but is not so slow that it doesn't offer some buy/accumulate or sell/reduce insights. Adding in a 10 and 14 week EMA is a useful proxy for a popular daily EMA's many people like on the daily charts. Take look at how in a downturn the price crossing down through the 10 week EMA is a sell/reduce signal and a break in the 14 week EMA is sell/reduce trigger, or in an upturn reverse that, the price crossing up through the 10 week EMA is a buy/accumulate signal and the 14 week EMA is a buy/accumulate trigger.

I like these indicators as well, the Twiggs Money flow is a indication of buyer sentiment, in this case it's declining and about to test 0%, which suggests a continuation of bearish sentiment. The daily RSI has moved to oversold though the trend is strongly down and has been since the Aus Roadshow price pop, there's a clue there (price rising RSI declining, not a good sign). The SlowSto with a long weekly %K picked up the price weakness way back about the same time the 10week EMA crossed down through the 14 week EMA, it's still anaemic. Add in some obvious support and resistance lines and there's a nice simple chart with only three decisions since the spike high at $45.

Right now the price is still below those weekly EMA's and they're suggesting a crossover-down, the sell/reduce signal and trigger on this chart was during week ending 24 Apr. There's modest price support at $19, though the gap Oct10-17'2014 could prevail. Beneath that is the break out around $16 and the lows around $15 which are much more solid price support.

I hope you like the chart, I'd like to see what chart you use if you're not focused on the daily price action, and your analysis of what you think the price might do.

BAA
7328

[JamesST]

But it would be even better for shareholders if they aren't making any profits in 2020 and are still growing!


Of course they are still heroes

Some 3 million customers in 2020 at say $400 a year and 70% Gross Margin and $200m a year to keep running and even after tax that's heaps and heaps of earnings .... at least $400m. A 20 times earnings and discounted back to today dollars is more than $20 a share

Believe the story

[winner69]

But it would be even better for shareholders if they aren't making any profits in 2020 and are still growing!

But Even Rod would have trouble spending the $1.2 billion cash coming in, wouldn't he?

[Dentie]

http://www.nzherald.co.nz/markets/news/article.cfm?c_id=62&objectid=11441759&ref=newsl_businessnewsdirect_J20080610_113625_2167 _4261_883682029

Certain amount of arrogance here I think.

Here's one example ...."If someone comes up and says when will you guys make a profit, I'm going to punch you in the face because we have a quarter of a billion in cash to invest," Drury said.

Here's another ....Xero boss Rod Drury says the accounting software developer has changed its tactics for hiring senior executives after the departure of a US chief executive who lacked urgency and a chief financial officer who didn't like to travel.

Good to see a lil' ole Kiwi giving the US executive market a bit of biff. Now let's see more growth ...

[Cricketfan]

http://www.nzherald.co.nz/markets/news/article.cfm?c_id=62&objectid=11441759&ref=newsl_businessnewsdirect_J20080610_113625_2167 _4261_883682029

Certain amount of arrogance here I think.

Here's one example ...."If someone comes up and says when will you guys make a profit, I'm going to punch you in the face because we have a quarter of a billion in cash to invest," Drury said.


Heh.

7330

[PSE]

Creating shareholder value

Xero has created heaps - more than $2.7 billion worth

Shareholders have fronted up with $492m of cash. That was worth $3.2 billion as at March 31st on the market.

Even the guys who fronted with $20 a share a month or so ago aren't really underwater. All other shareholders who have fronted up with real cash have done really well.

Table is how this has progressed over the years

The real providers of capital (investors) have done well, maybe the majority of those who trade prices (ie buy an existing share off someone else and call themselves investors in Xero) are the mugs in this game. Exception are those who bought earlier than a couple of years ago and still hold ..... they not mugs

The 2.7 billion is not really creating value but creating market expectations.
If these are met then Rod will be a hero if not a villain, kind of interesting that there is not much difference - for the risk taker.
Nowadays these risk takers use other people's money, an extraordinary level of faith they have to trust xero with 2.7 billion of their money.
Growth companies are by definition risky as the shareprice moves away from asset backing then sentiment can turn against them and the floor can be very low.
On the other hand when the right company is picked the returns are huge.
I hear on this thread the software is great but someone also said expensive, not being in the industry I wouldn't understand the company enough to buy.
While the company is making losses the growth story could play out but still result in poor returns for shareholders if capital is raised diluting existing holders. Because of the risk involved I would be wanting much more than 3x my investment, which can be found often in cyclicals and turnarounds.
If you valued the company on a PE of 20 it needs to make 135 million of profit per annum to justify the valuation, is 405 million profit realistic in this industry for shareholders to triple their money?
Seems like a big number to me, can the market for accounting software really be so lucrative?

[lastmoa]

"We think somebody needs to create the Facebook-sized company in small business - it could be us," Drury said.

"This is the biggest monetisable opportunity on the web. We feel confident. We think we have got a real shot at being that hugely global significant company."

Hats off to a NZ post- startup that actually has a shot at making a big impression on the world stage. Xero actually does have a shot here and my shares are in the sock-draw until that time (and adding to them). Looking much much better than a lotto ticket.

[JamesST]

If you valued the company on a PE of 20 it needs to make 135 million of profit per annum to justify the valuation, is 405 million profit realistic in this industry for shareholders to triple their money?
Seems like a big number to me, can the market for accounting software really be so lucrative?
Intuit makes a quarterly profit of ~$100mill (quickbooks only a part of that admittedly)
Shareholders don't think that PE is relevant in determining valuation in a fast growing SaaS company. The Life Time Value of the 200,000 odd customers that Xero signed up in the last 12 months alone is about $320million. At current trends the LTV of the customers that Xero sign up in the next 12 months alone will be an additional $532mill. And so on.
The $2 billion question is how long will the high growth continue.

[JamesST]

But Even Rod would have trouble spending the $1.2 billion cash coming in, wouldn't he?
Actually - This was almost exactly the amount Intuit spent on sales and marketing in 2013. They should be more than capable of spending this if they truly have global ambitions.

[Xirr]

James. You set up the operating cost structure at the beginning that you can replicate going forward. If a company is making significant losses, you are gambling that they will be able to rein it in going forward without losing customers.

In that respect, your parroting of Rod's LTV is essentially worthless because there is no proof that they will ever be able to restructure their costs to actually create value. Gambling that Xero will somehow, someday manage to cut its costs enough to get to breakeven without losing customers is just that, gambling.

There is no justification for Xero to have the highest valuation multiples I have ever seen.

Explaining this to Rod could have been a good reason for the early exit of the CFO.

Lets look again at Salesforce to see how cost structures change over time.

Salesforce.com vs salesforce.com vs xero
Full year ending
31 January 2006 vs 31 January 2015 vs 31 March 2015
Operating revenues
$309.9m vs $5.4billion vs $123.9m
Cost of revenues (as % of revenue)
22% vs 24% vs 30%
R&D (as % of revenue)
8% vs 15% vs 40%
Sales and marketing (as % of revenue)
48% vs 51% vs 75%
General and administration (as % of revenue)
15% vs 13% vs 20%

In the example above, Salesforce (2006) and Xero (2015) have almost identical revenue growth and # employees, except Salesforce generates more than twice the revenue per employee than Xero does. What does this tell you? Xero needs more back office staff, coders and account management people than Salesforce does to generate the same $ of revenue. These costs dont go away.

Example - the proportion of spending for Salesforce does not change (at least markedly, except to get bigger) from 2006 to 2015. Xero's spending is out of control.

Salesforce has always operated at profit, or at least narrow loss making. The (believable) story is that when it matures, it cuts costs and it makes money. If its almost making money while growing, then at maturity, it will clearly be able to do so.

Xero, on the other hand, say "costs do not matter, revenue growth is all that is important". People who have financial pedigree and know the history of tech companies and aren't as blinkered as accountants who invest solely on the basis that they love the product, are calling Rod out on that, and fair enough.

[skid]

"We think somebody needs to create the Facebook-sized company in small business - it could be us," Drury said.

"This is the biggest monetisable opportunity on the web. We feel confident. We think we have got a real shot at being that hugely global significant company."

Hats off to a NZ post- startup that actually has a shot at making a big impression on the world stage. Xero actually does have a shot here and my shares are in the sock-draw until that time (and adding to them). Looking much much better than a lotto ticket.

Good that you have faith in the company ,but if your comparing their chances of success to a lotto ticket your not setting your sights to high:)

[Cricketfan]

James. You set up the operating cost structure at the beginning that you can replicate going forward. If a company is making significant losses, you are gambling that they will be able to rein it in going forward without losing customers.

In that respect, your parroting of Rod's LTV is essentially worthless because there is no proof that they will ever be able to restructure their costs to actually create value. Gambling that Xero will somehow, someday manage to cut its costs enough to get to breakeven without losing customers is just that, gambling.

I don't think they are planning on cutting costs, I think they have increased their costs to cater for future growth. In Rod's words, they are now "at scale" meaning the costs should level out while revenue keeps increasing.

[Dentie]

James. You set up the operating cost structure at the beginning that you can replicate going forward. If a company is making significant losses, you are gambling that they will be able to rein it in going forward without losing customers.

In that respect, your parroting of Rod's LTV is essentially worthless because there is no proof that they will ever be able to restructure their costs to actually create value. Gambling that Xero will somehow, someday manage to cut its costs enough to get to breakeven without losing customers is just that, gambling.

Xero, on the other hand, say "costs do not matter, revenue growth is all that is important". People who have financial pedigree and know the history of tech companies and aren't as blinkered as accountants who invest solely on the basis that they love the product, are calling Rod out on that, and fair enough.

Agree Xirr.

Just because a client signs up to what Xero has to offer today....it doesn't automatically follow that they are going to be "long term clients" - let alone "life time clients"...irrespective of whether SAAS is a "lifetime" proposition, or not.

I suspect a lot of clients just blindly believe in what their Accountant tells them....but a lot also wake up at some point and see the light. Admittedly - some take longer than others but the bottom line is "client attrition" is a recurrent reality in that game.

As Xero (& other Accounting SAAS firms!!) keep inventing and refining their product offerings, I can see where Accounting firms will become a backwater anyway - as they will no longer be necessary. So it will then become a matter of clients signing up because they want to - as opposed to just being drafted in on the recommendation of their Accountant.

[mikeybycrikey]

Lets look again at Salesforce to see how cost structures change over time.

<...snip...>

Xero, on the other hand, say "costs do not matter, revenue growth is all that is important". People who have financial pedigree and know the history of tech companies and aren't as blinkered as accountants who invest solely on the basis that they love the product, are calling Rod out on that, and fair enough.

I've just been reading up on Salesforce. It seems that they don't make a profit either.

After 16 years, it looks like Salesforce is still spending all the money they can get their hands on to grow the business. Maybe we won't see Xero in profit for another ten years at this rate?

[Nasi Goreng]

If you are looking for profits at Xero in the next few years, you are looking at the wrong stock. It is all about revenue growth for now and into the future while they grow their business. The question for share holders and potential investors is, do you believe the hype?

I don't see a problem with them burning cash as long as top line growth continues. If they are hitting their goals, they will probably need even more cash to continue to grow and shouldn't have a problem getting it. The flip side though is very ugly if growth % starts to fall.

Disc: not holding

[Nasi Goreng]

SAP recently bought Concur for 15 times revenue. Xero is currently trading at 22 times revenues although is arguably at an earlier stage in its life cycle.

Its conceivable at current prices for Xero to be trading at 15 times revenue by the end of the year... but this is still by no means cheap.

[JamesST]

In that respect, your parroting of Rod's LTV is essentially worthless because there is no proof that they will ever be able to restructure their costs to actually create value. Gambling that Xero will somehow, someday manage to cut its costs enough to get to breakeven without losing customers is just that, gambling.

All the relevant figures are quite clear in the investor presentation. It shows to me that they can reach profit by scaling down sales and marketing as the opportunity for growth tails off.
If you don't believe the figures in the investor presentation then definitely don't invest.



Salesforce has always operated at profit, or at least narrow loss making. The (believable) story is that when it matures, it cuts costs and it makes money. If its almost making money while growing, then at maturity, it will clearly be able to do so.

Your parroting of salesforce stats belies your financial pedigree. They're pretty much in the press every quarter for making losses.

[mikeybycrikey]

SAP recently bought Concur for 15 times revenue. Xero is currently trading at 22 times revenues although is arguably at an earlier stage in its life cycle.

Its conceivable at current prices for Xero to be trading at 15 times revenue by the end of the year... but this is still by no means cheap.

Although if you use ACMR, instead of FY revenue (which arguably makes some sense for a fast growing company), then you're down at 17 times ACMR. Still probably expensive but not as crazy at 22x.

[JamesST]

Yes - I agree. This concerns me.
What percentage of new customers are startups? Why is the churn in NZ < 1% per month? Will the churn in the US reduce more as the product features improve? Will the ARPU drift down over time or increase with new chargeable features? Why did CAC increase so much in the UK?
These are the types of questions I'm interested in answering. I personally don't find the PE ratio relevant.


You cannot ascribe a life time value to small businesses. The majority of them won't still be in business in five years (http://smallbiztrends.com/2012/12/start-up-failure-rates-the-definitive-numbers.html)
The thing people forget is that XRO is targeting small businesses, and the failure rate is high. You cant compare Consumer SaaS companies as they dont lose half their customer base every five years due to death (except maybe a funeral or aged care provider!) or Enterprise SaaS companies whose customer base will last for decades and is extremely sticky.

The thing that XRO has to prove is that the SaaS model works in the small business market - that customer revenues for the short periods of time they are customers for are sufficient to cover the payback period and deliver profits, and outweighs the high cost of acquiring the customer in the first place. If each customer leaves before XRO has turned a profit on it, then they have a business model where the more customers they get the more losses they make, as churn increases. eg. If you have 1 million customers and your churn is 20% per year, you are losing 200,000 customers a year, most of which you have never made money from.

[winner69]

MYO seems to have been well accepted to the ASX

Might rub off on XRO

[Daytr]

Yes but you are discounting an extremely lofty estimate of sales revenue & using a multiple of 20 you think this equates to fair value!
Under your very sunny disposition perhaps a PE slightly lower than 20 & a probability factor against your enthusiastic revenue estimate might more fairly value the current SP ?



didn't I say ....... discounted back to today dollars is more than $20 a share

[Daytr]

Add the growth of chains putting Mom & Pop businesses out of business & the next generation is being employed by the chains.
Not that many of these Mom & Pop businesses were potential clients anyway, something that Rod & crew have failed to recognize.


And lets not forget the demographic changes as baby boomers retire. One of the problems is finding people to take over these small family businesses. More often than not they are shut down, rather than sold, simply due to a lack of buyers.
http://www.mycopilot.co.nz/Accounting-blog/pent-up-wave-of-sales-as-baby-boomers-struggle-to-sell-their-businesses

[JamesST]

Add the growth of chains putting Mom & Pop businesses out of business & the next generation is being employed by the chains.
Not that many of these Mom & Pop businesses were potential clients anyway, something that Rod & crew have failed to recognize.

It's a wonder that anyone bothers providing services to SME businesses with this perfect storm brewing.

[JamesST]

I think there is a distinct possibility that the whole SaaS idea for this market will be a big disaster. When selling desktop software at least Intuit and MYOB make a profit straight away, and they couldnt give a flying duck about whether their customer sticks around or not. The whole switch to monthly subscriptions could be one huge mistake for the entire industry, as no-one makes money any more. As I said, its not just the XRO business that has to prove itself, its the entire SMB SaaS business model.
Why would Intuit and MYOB be shifting their entire customer bases from desktop to SaaS if that was the case?

[Casino]

Why would Intuit and MYOB be shifting their entire customer bases from desktop to SaaS if that was the case?

Nothing wrong with SAAS as a business model. But the questions people need to ask are outlined here:

http://sixteenventures.com/saas-cac-efficiency

[Daytr]

What are you on about? Are these not global trends that are happening?
Or would you prefer to ignore such things as XRO seem to do with their striking of potential market size?


It's a wonder that anyone bothers providing services to SME businesses with this perfect storm brewing.

[winner69]

Robbo, what happened to the hammer? or was it a dragonfly?

Price seems to be down a bit today

[robbo24]

Robbo, what happened to the hammer? or was it a dragonfly?

Price seems to be down a bit today

Not mine, Moosie's :D But from my brief look XRO.ASX went up 1.76% for most of the day. Maybe that's what he meant?

[emveha]

So Xero is planning to exploit for commercial purpose the data it is gathering http://www.interest.co.nz/business/75294/xero-set-share-more-info-it-has-nz-smes-its-clients-big-businesses-and-govt
How would you feel knowing that your numbers are going to be used in some statistics available to the concurrence?

[Harvey Specter]

So Xero is planning to exploit for commercial purpose the data it is gathering http://www.interest.co.nz/business/75294/xero-set-share-more-info-it-has-nz-smes-its-clients-big-businesses-and-govt
How would you feel knowing that your numbers are going to be used in some statistics available to the concurrence?Its obviously anonomised and aggregated. As such, the benefit is probably more than any downside. Would need to see the full details but I dont think I have an issue with it.


“If you’ve got 10 florists in Napier, you’re probably not going to benchmark that, because there aren’t enough of them. But if you’ve got 1000 florists in NZ, I think you’re quite safe.”

[JamesST]

Do you seriously think that Xero may one day disclose the turnover of each of their customers?


I doubt that will last. Ebay data is not anonymised, you can see exactly who is selling what and how much they are turning over. That's why you pay for the data. What is the point of knowing what 1000 florists in NZ are doing collectively? What you want to know is what the 10 florists in Napier are doing. Otherwise its a pointless waste of money.

It will look something like this http://www.terapeak.com/

[Harvey Specter]

What is the point of knowing what 1000 florists in NZ are doing collectively? What you want to know is what the 10 florists in Napier are doing. Otherwise its a pointless waste of money.your not wasting money as (at this stage) they aren't charging for it. Maybe in the future if you want more incremental analysis.

But even so, know what the average GP and NP ratios for those in the same industry will help you determine how you are going. However, it could be very misleading as I am sure ratios would be different for a B&B, 10 unit motel, camp ground but they may all show up as holiday accommodation.

[Dentie]

Do you seriously think that Xero may one day disclose the turnover of each of their customers?

I wonder if XRO would have got the buy-in from SME's if they had provided full disclosure of their data sharing intentions? Funny really, SME's are paying XRO monthly fees to provide XRO with their own (very valuable) financial information - straight from the bank - to apparently do with what they want. In return, XRO is providing some monthly reports that a number of SME's probably don't fully understand anyway and at the same time, making some Accountants redundant in the process.

With all that valuable financial information from SME's they hold, I imagine XRO will become quite valuable to some very interested third parties (think IRD for a start). I can certainly see another potentially valuable revenue stream for XRO.

And it all started quite innocently for some....an accounting platform in the sky. Whatever is the real grand plan? No doubt that will be disclosed at some future point....

[Harvey Specter]

Note that the IRD can already demand an interface into you accounting system to enable the to perform data analysis. So other than the real time nature, this is of no benefit.

I do wonder it we will start getting targeted emails. Ie insurance co gets list of all companies with insurance cost over $50k. Or electricity, telephone companies .... They could even filter the list by those with good credit (ie profitable and pay bills on time) and location.

I think this is the future but will probably require opt in. Maybe they will charge less to those that do?

[winner69]

http://www.afr.com/business/accounting/xero-settles-social-media-stoush-with-peeved-bookkeepers-20150505-1mw1oq

[Baa_Baa]

Hardly new news or a secret, Drury from Feb 2013 answers a few of the questions raised here today http://www.computerworld.co.nz/article/488416/xero_investigates_big_data/ .
Google "Xero Big Data" and fill your boots, it is the grand plan.


I wonder if XRO would have got the buy-in from SME's if they had provided full disclosure of their data sharing intentions? Funny really, SME's are paying XRO monthly fees to provide XRO with their own (very valuable) financial information - straight from the bank - to apparently do with what they want. In return, XRO is providing some monthly reports that a number of SME's probably don't fully understand anyway and at the same time, making some Accountants redundant in the process.

With all that valuable financial information from SME's they hold, I imagine XRO will become quite valuable to some very interested third parties (think IRD for a start). I can certainly see another potentially valuable revenue stream for XRO.

And it all started quite innocently for some....an accounting platform in the sky. Whatever is the real grand plan? No doubt that will be disclosed at some future point....

[Dentie]

Hardly new news or a secret, Drury from Feb 2013 answers a few of the questions raised here today http://www.computerworld.co.nz/article/488416/xero_investigates_big_data/ .
Google "Xero Big Data" and fill your boots, it is the grand plan.

Thanks BaaBaa - never saw this. However, a couple of subtle differences in regards to what the real grand plan may be. A couple of Rod's quote's...

“It would be very valuable to our customers if we could give that insight back to them, so that they can use it to improve their businesses.”...and...

“Our plan is to be able to demonstrate to [our customers] that we can give them insights that are valuable to them,”.

Back then, Rod is making it clear the data (or "fantastic insights") will be "valuable to their customers" (which the customers are happy to pay for). He didn't mention anything about also providing other interested parties with those "fantastic insights" - so I'm not convinced there is not actually a "grander plan". Rod's an entrepreneur remember.

I would suggest the info captured by XRO (& other like accounting systems) would be absolutely priceless to some parties.....for example, I believe XRO has been pitched very strongly to Government agencies right from the starting blocks. Actually makes me feel quite uncomfortable.

[Harvey Specter]

I would suggest the info captured by XRO (& other like accounting systems) would be absolutely priceless to some parties.....for example, I believe XRO has been pitched very strongly to Government agencies right from the starting blocks. Actually makes me feel quite uncomfortable.XRO cant provide your specific info to anyone without your consent. I am in no doubt this will come but it will be via out in (actually most likely to follow Facebooks lead and do opt out). You will have a choice and the ultimate choice will be to switch suppliers.

The IRD scenario is the most interesting. They have more powers than the police and already could demand info from Xero (as they have done in the past from Trademe and the Land Transfer Office). But what if they used Xero big data to their advantage. They could ask Xero for a list of businesses that aren't as profitable as their peers (ie. could signal lots of cash jobs) or those that spend a lot of money at Glengarys (might signal private expenses) etc. Note, this can be done under existing law!

[skid]

I would be uncomfortable as well--A few examples would have been beneficial.
If you combine that relatively vague statement with the fact that they say they ''own''your data(and you apparently cannot have it back if you leave) it sounds a bit scarey--There are of course privacy laws about that sort of thing ,but those are increasingly being infiltrated with ''exceptions''--One small mention of terrorism and even Google and Facebook are spilling the beans to the NSA it is rumored.
New Zealands government has certainly shown it is happy to play that game as well.
Having said all that ,I would imagine it would be rather general information though.

[skid]

XRO cant provide your specific info to anyone without your consent. I am in no doubt this will come but it will be via out in (actually most likely to follow Facebooks lead and do opt out). You will have a choice and the ultimate choice will be to switch suppliers.

The IRD scenario is the most interesting. They have more powers than the police and already could demand info from Xero (as they have done in the past from Trademe and the Land Transfer Office). But what if they used Xero big data to their advantage. They could ask Xero for a list of businesses that aren't as profitable as their peers (ie. could signal lots of cash jobs) or those that spend a lot of money at Glengarys (might signal private expenses) etc. Note, this can be done under existing law!

Not only that ,but they can completely ignore privacy laws by giving tax information to a foreign government as is the case with their agreement with USA.
I have heard of them doing this with some who have never set foot in America but had a parent they never knew who was from there.
Sometimes it boggles the mind!--(guess we shouldnt be surprised after the NSA tapped the phones of European heads of state(Germany etc.)

[Harvey Specter]

Not only that ,but they can completely ignore privacy laws by giving tax information to a foreign government as is the case with their agreement with USA.
I have heard of them doing this with some who have never set foot in America but had a parent they never knew who was from there.
Sometimes it boggles the mind!--(guess we shouldnt be surprised after the NSA tapped the phones of European heads of state(Germany etc.)Sounds like a bit of conspiracy theory here.

Maybe justified if you are a large aeronautical manufacturer but if you are a sparky from Grey Lynn or a burger bar in Tawa, I wouldn't be to concerned.

[gv1]

The IRD scenario is the most interesting. They have more powers than the police and already could demand info from Xero

Certainly they have great powers, but they don't have to ask Xero because they have their own systems to do so.

[Harvey Specter]

The IRD scenario is the most interesting. They have more powers than the police and already could demand info from Xero

Certainly they have great powers, but they don't have to ask Xero because they have their own systems to do so.They may have the systems, but not the data. That is why they asked Trademe for those that appear to be trading. And likewise, the land transfer office for those that appear to be habitual buy and flick speculators.

[mikeybycrikey]

Sounds like a bit of conspiracy theory here.

Maybe justified if you are a large aeronautical manufacturer but if you are a sparky from Grey Lynn or a burger bar in Tawa, I wouldn't be to concerned.

This isn't actually a conspiracy theory. Law change was brought in last year.

Skid is exaggerating a little in that applies to US citizens and other U.S. taxpayers. You'll probably know if it applies to you, even if you're not happy about it. There has been an increase in people trying to get rid of US citizenship.

https://www.ird.govt.nz/international/nzwithos/fatca/

[Dentie]

The IRD scenario is the most interesting. They have more powers than the police and already could demand info from Xero (as they have done in the past from Trademe and the Land Transfer Office). But what if they used Xero big data to their advantage. They could ask Xero for a list of businesses that aren't as profitable as their peers (ie. could signal lots of cash jobs) or those that spend a lot of money at Glengarys (might signal private expenses) etc. Note, this can be done under existing law!

Yes it can....but look at the sheer efficiency factor by having the likes of XRO (& its peers) provide you with neatly packaged, real time, highly relevant & accurate data - all in the blink of an eyelid!!

Not trying to be a conspiracist here...just a potential realist unfortunately.

[Harvey Specter]

This isn't actually a conspiracy theory. Law change was brought in last year. Ahh - Facta. Only applies to US citizens. terrible law may by the US and forced upon the world. Still that info goes to IRS, not NSA so they can enforce their draconian world wide income tax on all Us citizens (while they let corporates wrought the system).


Not trying to be a conspiracist here...just a potential realist unfortunately.My conspiracy claim refered to suggestions IRD would give info to NSA. Completely agree with your comments. The big data that Xero holds (and MYOB online) would be extremely valuable for doing targeted audits.

[gv1]

They may have the systems, but not the data. That is why they asked Trademe for those that appear to be trading. And likewise, the land transfer office for those that appear to be habitual buy and flick speculators.

Too speed up investigations and prosecution, Govt depts are well resourced. But monkeys are working for them... it takes time hence all these requests.

[skid]

This isn't actually a conspiracy theory. Law change was brought in last year.

Skid is exaggerating a little in that applies to US citizens and other U.S. taxpayers. You'll probably know if it applies to you, even if you're not happy about it. There has been an increase in people trying to get rid of US citizenship.

https://www.ird.govt.nz/international/nzwithos/fatca/

I was exaggerating in terms of the norm,but that was no exaggeration in terms of those who find they are ''accidental US citizens for tax purposes''

http://money.cnn.com/2014/12/15/pf/accidental-american-expat-tax/

I met an american in Thailand who was pretty upset about the whole thing--(not sure if he was accidental,but the point is still the same)

I guess theres a bit of conspiracy theory in all of us at times--After watching ''The Imitation Game'' it certainly puts that sort of thing in perspective--It was a great flick that more or less told the story of a true event that certainly would have gone down as a conspiracy theory----If it wasnt true.


BUT-my NSA mention was about the wiretapping of Europeon leaders---The IRD actually gives the info to the IRS (the US taxman)--which conveniently bypasses banks having to break privacy laws(they give the info to IRS and IRS flaunts the privacy laws.

(didnt mean to give the impression that this happens to normal Kiwis that dont have any afilliation with the USA accidental or otherwise)--You would be amazed how easy it is for even Kiwis to become ''tainted'' by this though.
Ive heard stories of an organization with a volunteer treasurer (who was from America from way back)who were subject to an audit involving US taxman because of this law. )

[RGR367]

For those who are good at numbers, you may want to compare how Sage is doing or competing ............. http://www.sage.com/investors/press-releases/2015/05/06/sage-group-plc-unaudited-results-for-the-six-months-ended-31-march-2015

[artemis]

They may have the systems, but not the data. That is why they asked Trademe for those that appear to be trading. And likewise, the land transfer office for those that appear to be habitual buy and flick speculators.

IRD also asked real estate agencies for similar data.

[Harvey Specter]

IRD also asked real estate agencies for similar data.didn't know that. I assume that is to capture those using different entity names that they didn't pick up via the land transfer office.

[Baa_Baa]

For those who are good at numbers, you may want to compare how Sage is doing or competing ............. http://www.sage.com/investors/press-releases/2015/05/06/sage-group-plc-unaudited-results-for-the-six-months-ended-31-march-2015

Good info, but hard to draw comparisons, Sage make a lot of money, are growing profits and paying dividends. Is Rod going to punch me in the face for saying that?

[Harvey Specter]

Good info, but hard to draw comparisons, Sage make a lot of money, are growing profits and paying dividends. Is Rod going to punch me in the face for saying that?But revenue growth is minimal

[Baa_Baa]

But revenue growth is minimal

Yes, only 40m pounds on H1'14, despite Xero eating their lunch.

[robbo24]

what happened to that bounce that moosie was alluding too.

There it is - right there in green.

7333

[robbo24]

now that's clear as mud..........is that a 25 cps bounce after $1.50 fall then followed by another fall then another fall and then todays fall

Dunno - he was on XRO.ASX. Went up 40 cents or so after the doji on my recollection. Is 2% in a day not a bounce in your book?

Certainly beats the bank.

Anyway, I don't really follow XRO anymore - good luck to all holders :D

[skid]

now that's clear as mud..........is that a 25 cps bounce after $1.50 fall then followed by another fall then another fall and then todays fall

Every one knows its because its Fall--If you want it to spring up you'll have to wait till spring--Cmon guys get with it..:eek2:

[winner69]

Rod likes this story from FisherFunds (prob Carmel herself)

When losses mean a leap of faith

http://www.nzherald.co.nz/brand-insight/news/article.cfm?c_id=1503637&objectid=11443600

Extract Businesses like Xero are forward-looking rather than backward-looking. The success of the business is about what it is likely to make this year, next year and the next, not what it has earned and spent in the previous period. The problem is, forward-looking businesses require estimates, projections, assumptions and yes, finger crossing.

[robbo24]

Dunno - he was on XRO.ASX. Went up 40 cents or so after the doji on my recollection. Is 2% in a day not a bounce in your book?

Certainly beats the bank.

Anyway, I don't really follow XRO anymore - good luck to all holders :D

Choice! Another XRO doji on the ASX chart (http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=au%3Axro&time=7&startdate=1%2F4%2F1999&enddate=5%2F7%2F2015&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=4&maval=50%2C100%2C200&uf=8&lf=32&lf2=0&lf3=0&type=4&style=320&size=4&x=66&y=0&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11)! And a gap from yesterday's open! :D

[lastmoa]

Good Xero article for those Buffett-style investors :
http://www.nzherald.co.nz/brand-insight/news/article.cfm?c_id=1503637&objectid=11443600

Not all companies are created equal.

[RGR367]

Here's a view of a tech-bubble from XRO investor named Peter. Just in case some of you are worried about another one happening again soon. http://www.businessinsider.com.au/peter-thiel-has-an-insane-story-about-what-a-real-tech-bubble-feels-like-2015-2

[couta1]

XRO did not make the list
http://www.cnbc.com/id/102609977
I see Snapchat at number 50, congrats mate you made the list, you have been known to be fairly disruptive around here;)

[couta1]

hey Couta

Are you still in this stock?
Not at the moment.

[winner69]

The days are long, the decades are short.

[Santiago]

http://www.forbes.com/growth-companies/list/#tab:rank

[Ginger_steps_]

http://www.forbes.com/growth-companies/list/#tab:rank Niiiice! Also good to see Xero signing up more global parters such as BDO South Africa recently - looking forward to the big data insights and US payroll rollout so Xero can pay some more attention to global sales.

[Xirr]

http://www.forbes.com/growth-companies/list/#tab:rank

"Companies with a current market cap above the NPV of cash flows have an innovation premium built into their stock."

*Clap clap* Xero just won the most overvalued company award. That isnt a surprise.

[Stranger_Danger]

"Companies with a current market cap above the NPV of cash flows have an innovation premium built into their stock."

*Clap clap* Xero just won the most overvalued company award. That isnt a surprise.

For the second year running wasn't it? After the share price had halved?

[Santiago]

"Companies with a current market cap above the NPV of cash flows have an innovation premium built into their stock."

*Clap clap* Xero just won the most overvalued company award. That isnt a surprise.

Well you could see it that way, and I guess the whole profit argument had been done to death on this forum while overseas buyers come in and own it. And I suppose I could say that if you want your steady profit and 1c dividend then go and buy power co shares or purchase a corner dairy or something. But actually the reason why I posted the link was because isn't it kind of cool that a NZ company is taking first spot 2 years running? Anyone feel like, just a little bit, proud or some sense of positivity rather than the general loathing that we've been seeing lately? Great branding for Xero, for NZ, and maybe just a little reminder to the haters that it is not all about profit and nothing else when you see it from the perspective of those that aren't fortunate enough to live on these fair lands. Indeed those fools over in the U.S. (where they know little of business and investing by the looks of things given the amount of U.S. money that has been channeled into this loser company recently) actually concern themselves with the concept of potential. Ie- to look forward and see what could be rather than look back and see what has been. Great to see Xero still leading the list.

[Xirr]

From Matt Nippert's twitter feed.

@MattNippert: Creativity in business over-rated: "Fortune named Enron 'America's Most Innovative Company' for 6 consecutive years." http://t.co/xibvAK27O9

Hey I used to be one of Xero's biggest cheerleaders back when it was a buck and change but I'm going to call a meaningless award when I see it.

[lastmoa]

Well you could see it that way, and I guess the whole profit argument had been done to death on this forum while overseas buyers come in and own it. And I suppose I could say that if you want your steady profit and 1c dividend then go and buy power co shares or purchase a corner dairy or something. But actually the reason why I posted the link was because isn't it kind of cool that a NZ company is taking first spot 2 years running? Anyone feel like, just a little bit, proud or some sense of positivity rather than the general loathing that we've been seeing lately? Great branding for Xero, for NZ, and maybe just a little reminder to the haters that it is not all about profit and nothing else when you see it from the perspective of those that aren't fortunate enough to live on these fair lands. Indeed those fools over in the U.S. (where they know little of business and investing by the looks of things given the amount of U.S. money that has been channeled into this loser company recently) actually concern themselves with the concept of potential. Ie- to look forward and see what could be rather than look back and see what has been. Great to see Xero still leading the list.

Well said, Santiago. I had given up reading XRO forum here as it was all starting to be same same/bash bash. Good post. Lots to be proud of from lil' NZ tech scene.

[tga_trader]

Well said, Santiago. I had given up reading XRO forum here as it was all starting to be same same/bash bash. Good post. Lots to be proud of from lil' NZ tech scene.
Thats the problem though. Both sides are arguing completely different arguments. To the 'love it' side, Yes it's a great company, haven't they done well, good on them, hoorah etc, no one is arguing that. The 'against' argument is that it's overvalued as a stock which without a guidance on when there will be profit and how much (which when it happens will ultimately set the share price) theres no way to know what the value should be.
That's why this thread keeps going in circles.

[RGR367]

Thats the problem though. Both sides are arguing completely different arguments. To the 'love it' side, Yes it's a great company, haven't they done well, good on them, hoorah etc, no one is arguing that. The 'against' argument is that it's overvalued as a stock which without a guidance on when there will be profit and how much (which when it happens will ultimately set the share price) theres no way to know what the value should be.
That's why this thread keeps going in circles.

I don't think we'll ever get the Forum to agree on one thing about a particular share especially this stock. I'm happy to listen to both arguments or for all arguments that got presented on a company that I follow.

disc: still holding

[skid]

I am proud to see an innovative New Zealand Co giving it a go on the international stage (while my money sits in safer options)

[mikeybycrikey]

This Forbes list appears interesting.

It seems to be assuming that the market is always right and that the innovation premium means that investors are correctly pricing the stock despite current cashflows.

The alternative is that the market is wrong and some of these stocks are over valued.

On balance, it seems that the inmates have taken over the asylum and created a random list of over-valued companies.

The problem with Xero and other growth companies (especially loss-making ones like Xero) is that working out the growth is hard. And growth is the most important part of valuing them.

Using current cash-flow it's relatively easy to value a company that is showing minimal growth but when Xero's revenue in the last FY is about 12x what it was in FY11, it's really hard to value because revenue in FY19 could continue the 12x growth or (more likely) it will only be maybe 2x or 3x. Or anything in between.

I think the current price is counting on 5x growth in the next 4 years. This seems achievable to me given their history, but I wouldn't put them at the top of a list to celebrate it.

[kiwi_on_OE]

Xero Annual report out this week, or am I imagining it? Probably won't be much new, but I think they're over the 500k users now, I'm sure they'll be keen to announce that.

[winner69]

It might be a rocket ship, but it's pedal powered.

[winner69]

Over 20 bucks again

Good, no real investors under water now.

[Harvey Specter]

SAAS comps: http://www.bvp.com/cloud/comps

So Xero is at the high end of EV/Rev but it is also at the high end of Growth. Zendesk probably best comp to use and in the same SME market (more the medium to large with its customer service software)

[winner69]

SAAS comps: http://www.bvp.com/cloud/comps

So Xero is at the high end of EV/Rev but it is also at the high end of Growth. Zendesk probably best comp to use and in the same SME market (more the medium to large with its customer service software)

Great NZ success story eh, being in that illustrious company

It's the story that counts, not valuation multiples


Believe the story

[RGR367]

Is this new or what's the story here? Are they adding XRO once again? If you go down the site and read what's on the blog, it says XRO was added into it December 2013! http://www.bvp.com/blog/wix-textura-and-xero-are-new-additions-bvp-cloud-index

[Harvey Specter]

Is this new or what's the story here? Are they adding XRO once again? If you go down the site and read what's on the blog, it says XRO was added into it December 2013! http://www.bvp.com/blog/wix-textura-and-xero-are-new-additions-bvp-cloud-indexI think it has been in the index a while (dec 13 s you say) but the page I linked just shows the latest figures, so you can compare it to its contemporaries.

[Bilbo]

I believe the Annual Report is due today. No sign of it yet though.

I would expect them to announce 500K customers which they should have reached at the end of April. Probably not much else to announce?

[Harvey Specter]

I believe the Annual Report is due today. No sign of it yet though.

I would expect them to announce 500K customers which they should have reached at the end of April. Probably not much else to announce?I dont think there will be much new news in the annual report. It is a historical document relating to the 12 months to 31 March.

[winner69]

I believe the Annual Report is due today. No sign of it yet though.

I would expect them to announce 500K customers which they should have reached at the end of April. Probably not much else to announce?

The announcement will read -

Please see attached Annual Report for the year ended 31 March 2015

As hs says just a record of last year with lots of pretty graphics and the audited financial accounts

[mikeybycrikey]

I dont think there will be much new news in the annual report. It is a historical document relating to the 12 months to 31 March.

Although I expect there to be articles on NZH and Stuff about Xero extending their loss, even though it's old news.

[Bilbo]

The announcement will read -

Please see attached Annual Report for the year ended 31 March 2015

As hs says just a record of last year with lots of pretty graphics and the audited financial accounts

Yes and no. While mostly about the year to 31 March, last year they released a little commentary with the report, e.g they said "Xero recently passed 300,000 paying customers and was this week ranked number one by Forbes in its list of the World's 100 Most Innovative Growth Companies 2014." At 31 March 2014 they had 284,000 customers, so the annual report announcement included some post balance date information. This year I'd expect them to cut and paste the same announcement, but update customer numbers to "recently passesd 500,000", but also note that last year they released an investor presentation the day after the annual report.

[winner69]

The announcement will read -

Please see attached Annual Report for the year ended 31 March 2015

s
ANNREP: XRO: 2015 Annual Report

See attached 2015 Annual Report.


They left the please out

Anyway axe - any new gems included?

[Casino]

Intuit Q3 results are out. QBO subscribers up by 124k to 965k over last three months:

http://investors.intuit.com/files/doc_financials/2015/3Q/Fact-Sheet-and-Guidance_5-15-15_v001_m00090.pdf

[Harvey Specter]

For those that think they missed out on the big rise at Xero, you could try catching the next bus : https://www.seedrs.com/startups/freeagent

Back by the same VC that has backed Vend.

[Daytr]

More competition for XRO? Using the same sort of BS marketing.
X amount of companies in the UK etc.
Sounds familiar.

[JamesST]

In the Australian Financial Review written by a Deloitte Private partner

http://www.afr.com/technology/why-profit-is-the-wrong-metric-for-software-as-a-service-companies-such-as-xero-20150601-ghcrid?stb=twt

[Xirr]

In the Australian Financial Review written by a Deloitte Private partner

http://www.afr.com/technology/why-profit-is-the-wrong-metric-for-software-as-a-service-companies-such-as-xero-20150601-ghcrid?stb=twt

Yeah he believes the story alright...

If he only did his research, he would know that Salesforce was making profits at the same stage of its life as Xero is. He would know Facebook was making profits at the same stage of its life as Xero is. Profit doesn't matter? Yep, keep drinking that Kool-ade brother.

Demonstrate you can operate at a profit, then aggressively grow. If you can't demonstrate it, you are investing on hope. Hope has valued Xero (23x) on a higher EV/sales multiple than either salesforce (15x) or Facebook (10x) were on at an equivalent stage of their life. If this doesn't ring alarm bells, what will?

[Baa_Baa]

Yeah he believes the story alright, no doubt he owns shares also.

If he only did his research, he would know that Salesforce was making profits at the same stage of its life as Xero is. He would know Facebook was making profits at the same stage of its life as Xero is. Profit doesn't matter? Yep, keep drinking that Kool-ade brother.

Demonstrate you can operate at a profit, then aggressively grow. If you can't demonstrate it, you are investing on hope. Hope has valued Xero (23x) on a higher EV/sales multiple than either salesforce (15x) or Facebook (10x) were on at an equivalent stage of their life. If this doesn't ring alarm bells, what will?

Well put, particularly "demonstrate you can operate at a profit". It'd help also if they didn't have to reboot the USA story against declining growth in maturing markets. There's just no way of valuing XRO's SP except as you say, on hope.

[Hawkeye]

Sorry did you say stop growing and "demonstrate you can operate at a profit" or "slow down and let the others catch up"? to me they are almost the same.

[Xirr]

Sorry did you say stop growing and "demonstrate you can operate at a profit" or "slow down and let the others catch up"? to me they are almost the same.

I think what I'm saying is that there are plenty of companies out there that have demonstrated sales growth equivalent to or higher than Xero (salesforce and facebook being examples) while generating profits. You should at least have a credible story you can tell about how you can get to profits. I am a long time investor in tech companies, and Xero's cost %'s vs sales are way off the charts compared to other successful companies that I have invested in from an early stage in the past.

If you are asking investors to have faith that you will one day operate at a profit, then the market should value you lower than those that were able to demonstrate they were operating at a profit.

That hasnt happened in Xero's case. The market is valuing Xero on higher multiples than Salesforce/Facebook were when they were around $100m-$200m sales. The market is paying too much, in my opinion. The market is ignoring the possibility that Xero will have a significantly higher cost base than comparable SAAS companies at maturity, and will therefore be worth much less. This is my personal view, I like Xero a lot, but I think it has been fundamentally overvalued and its cost base has not been examined with a critical eye. The believers focus only on revenue growth and aren't comparing its % of costs to sales against other comparable companies, which would highlight the issue.

[skid]

Meanwhile -chartwise it is slowly heading towards a ''death cross'' useing the 30-120ma(for company not yet making a profit) so good to keep an eye out for that--(not there yet but..)

[JamesST]

The market is paying too much, in my opinion.
Are you saying that you think Xero's share price is overvalued?

[Baa_Baa]

Meanwhile -chartwise it is slowly heading towards a ''death cross'' useing the 30-120ma(for company not yet making a profit) so good to keep an eye out for that--(not there yet but..)

Using the Simple MA, 30SMA is 20.28 and 120SMA is 20.76 (both rounded up) so as you say the cross is imminent if the SP stays around here or lower, but SP is above the 30SMA now so could be seen by some as a short term breakout.

On my chart using the EMA's however on the same period, the death cross as you put it (most would attribute a death cross to be the 50/200 however, for a pre-profit as you put it also) the 30 EMA crossed down through the 120EMA on 25 May and the closing price today is a smidgen under the 30EMA. Call it overhead resistance if you like, where the 30EMA is a trigger and the 120EMA pulls the trigger. Take into account the horizontal resistance at $20.85-$21.20 as well with a target $23 above, a breakout UP through that would be significant on the charts, regardless of the SMA or EMA.
7385
Charts tells you whatever you want them to.

The thing I see is that the Money Flow is positive and rising, RSI pushed up through 50, but the slower indicator the SlowSTO, has yet to cross or rise above 20. Parabolic SAR has been positive since 11 May. Good news would boost the SP. No news will probably see the price rising on sentiment and anticipation of good news. Bad news seems unlikely as the quarterly results are a few weeks away.

Such is XRO, it defies any logic, has no basis in fundamentals and the charts only help with adjusting ones perception of the relative risks of entry or exit.
7384
It depends only on what your trading strategy is, and sticking to it.
;)

[Toasty]

http://www.stuff.co.nz/business/small-business/69046400/xero-deal-paves-way-for-better-small-business-stats

Just thought I would break into the slagging session to add the above link. Not sure what it means long term but I think its interesting as it shows Xero thinking beyond the basic accounting aspects of their product. We all know they are thinking about the big data approach but its interesting to see it start to manifest itself.

Carry on.

[lubos]

In the Australian Financial Review written by a Deloitte Private partner

http://www.afr.com/technology/why-profit-is-the-wrong-metric-for-software-as-a-service-companies-such-as-xero-20150601-ghcrid?stb=twt

The closest he can compare anything from Amazon to Xero is a division called "Amazon Web Services" which Amazon runs. This division rents IT infrastructure to companies as a service and it's very profitable. It made $265 million in profits on $1.57 billion revenue last quarter [1]. That's very good news.

Then he mentions Salesforce. In terms of revenue, Xero is today where Salesforce was back in 2005. And in 2005, Salesforce actually made a profit of $7 million on $176 million in revenue [2] (the article claims Salesforce has never made a profit) and since then, Salesforce operating cashflow has been always positive. Last year they made over $1 billion in operating activities for the first time. In other words, comparing cashflow statement of Salesforce [3] vs Xero [4]. It's clear Salesforce losses are being funded by their profit from operations. Xero losses are being funded by investors. Who cares about Salesforce loss on GAAP basis if their net operation cash flow has increased by 33%. Meanwhile Xero loss from operating activities has almost doubled. No wonder both companies are viewed differently by investors.

[1]: http://www.businessinsider.com.au/aws-earns-1-billion-a-year-on-6-billion-in-profit-2015-4
[2]: http://investor.salesforce.com/files/doc_financials/2005/fy05_annual_report.pdf
[3]: http://www.marketwatch.com/investing/stock/crm/financials/cash-flow
[4]: https://www.xero.com/media/7535315/xero_annual_report_2015.pdf

[Everwood]

Xero recently surpassed 500,000 subscribers. This notice appeared on ASX after NZX market was closed, but should appear on NZX tomorrow morning.

http://research.iress.com.au/ids/pds.asp?uid=87AC5A24738422D816AB3B9C32D6C8F6290000 008D1AFEF6D995E440F1AB000089400000&dt=20150603&id=01630710&mp=1

[RGR367]

Xero recently surpassed 500,000 subscribers. This notice appeared on ASX after NZX market was closed, but should appear on NZX tomorrow morning .............

Yeah, it's on their blog site now. Thanks.

[Leftfield]

Quite a few Xero press releases to coincide with Xerocon on Denver 3 - 4 June 2015. Announcements include; working with iOS, Vend & Deputy to improve Retail accounting via iPads, iPhones etc; New Business Performance Dashboard, and Payroll capabilities now extended to Colorado. Plus the 500,000 customers. All good progress.

[Bilbo]

Xero recently surpassed 500,000 subscribers.

A little concerned that it took 2 months to get from 475K to 500K customers. That's 25K over 2 months which would be 150K annualised, and no where near the growth needed. I assume they get more users near the beginning of the financial year in each market, so maybe April/May are quiet months other than NZ? Would be interested in people's comments. Have they released forecast growth for FY16?

[Daytr]

Bilbo, this is the problem I have had with some people's sales projections. They have basically been projecting multiples or percentages off previous sales & that those multiples or percentages are maintained. Whereas I think its likely, even though the number of clients gained may increase each year, ie. growth on growth, the multiples or percentages will actually drop. Particularly as XRO have already admitted that in the US they have to go out & get business face to face, rather than hoping that businesses will sign up on-line. This is a very intensive & expensive way to bring in clients for what is a relatively small paying service.

[Harvey Specter]

A little concerned that it took 2 months to get from 475K to 500K customers. They could just be rounding down.

I wouldn't read anything into it.

[winner69]

Bilbo, this is the problem I have had with some people's sales projections. They have basically been projecting multiples or percentages off previous sales & that those multiples or percentages are maintained. Whereas I think its likely, even though the number of clients gained may increase each year, ie. growth on growth, the multiples or percentages will actually drop. Particularly as XRO have already admitted that in the US they have to go out & get business face to face, rather than hoping that businesses will sign up on-line. This is a very intensive & expensive way to bring in clients for what is a relatively small paying service.

Right on ..... It's called growth rate decay ....growth rates gradually decline (but sales/customer numbers still increase.)

At least they half way to a million now.

[pierre]

Well...a pretty disappointingly subdued response to the announcement of very significant milestone for XRO.

500,000 customers is a magnificent achievement that we should be applauding loudly and congratulating Rod and the team for their drive and determination in reaching the half-way mark towards their lofty goal.

I'll bet when they set that BHAG (Big Hairy Audacious Goal) a few years back, a million customers must have seemed like aiming at the moon. Well the target certainly appears to be within reach now - even if the growth rate might be a little slower in some months compared with others and profits are still distant on the horizon.

I often think of the path that SKT followed - reporting losses year after year as they invested in growing their customer base - before reaching the tipping point and becoming a pretty productive cash cow. A few more years and we're sure to see the same outcome for Xero, unless it gets snapped up earlier by a smart buyer.

There's probably a Microsoft, Apple, Amazon or the like, who can see and understand the end game, that's watching and waiting for the right time to make their move. The questions are ....who and when?

Anyway - well done to the XRO team - a marvellous achievement and I hope you opened a few bottles of bubbly to celebrate. Onwards and upwards to the one million target.

[pierre]

From today\'s NBR Online:

Xero [NZX: XRO] has passed another key milestone in gaining half a million customers, having grown ten-fold in the past four years.

Speaking from a conference Xero is holding in Denver, founder and chief executive Rod Drury says he expects Xero will reach the millionth customer mark in less than another four years but he won’t be drawn on when his company will become profitable.

“It’s not all that relevant anyway, because our business has changed so much in the last three years (since he set the target of gaining a million customers),” Mr Drury says.

A key question continues to be how fast and to what extent Xero can build its customer base in the US.

At the conference, Xero has announced it is working with Apple and other companies in the US, including Avalara, which sells software to deal with sales taxes, bill.com and Mindbody.

Apple will be using Xero as its platform for small businesses in a similar way to what it did with IBM in the enterprise space, Mr Drury says.

Mindbody will be using Xero’s software in 42,000 gyms in the US, he says.

“I think that answers a big question around our US performance,” he says. “We’ve always said it wouldn’t be us on our own, it will be working with partners.”

Forsyth Barr analyst Blair Galpin says Xero has announced such partnerships before.

“All of those things are positive but we need to see them convert into actual sales.”

A good result
Mr Galpin says reaching the half million subscriber mark is a good result.

“They were always on that trajectory – we knew they were fairly close,” he says.

The accounting software company had 475,000 customers at the end of March.

The company gave no breakdown of where the growth came from but Mr Galpin says most of it will have come from the strongly growing markets of Australia and the UK.

Mr Galpin says, given the current run rate, it would be expected to take less time to reach the million mark than the four years it took to grow from 50,000 customers.

“The run rate is ramping up every year.”

Although some people remain sceptical of Xero’ value as it continues to chalk up growing losses, “half a million customers suggests there’s a core business there” in New Zealand, Australia and the UK.

That’s despite the still unanswered questions about how much traction it will gain in the US, Mr Galpin says.

Xero shares are unchanged at $20.40 and have gained 26% this year, spurred by February’s announcement the company had raised a further $147.2 million from Silicon Valley investors, though they’re still well shy of their peak at $45.99 early last year.

[Casino]

From today\'s NBR Online:

Xero [NZX: XRO] has passed another key milestone in gaining half a million customers, having grown ten-fold in the past four years.

Speaking from a conference Xero is holding in Denver, founder and chief executive Rod Drury says he expects Xero will reach the millionth customer mark in less than another four years but he won’t be drawn on when his company will become profitable.



In other words, growth will average around or a bit better than 20% over the next 4 years?

[Baa_Baa]

In other words, growth will average around or a bit better than 20% over the next 4 years?

And when did the 4 year clock start ticking? “It’s not all that relevant anyway, because our business has changed so much in the last three years (since he set the target of gaining a million customers),” Mr Drury says.

[Xirr]

In other words, growth will average around or a bit better than 20% over the next 4 years?

It will get there in 2 years (which is less than 4 years) I reckon averaging 50-60% growth, maybe a tad more.

Lance wiggs gets way too much airtime. His forecasts don't seem to recognise the concept of growth decay and he's meant to be the (self proclaimed) tech expert.

[Casino]

It will get there in 2 years (which is less than 4 years) I reckon averaging 50-60% growth, maybe a tad more.

Lance wiggs gets way too much airtime. His forecasts don't seem to recognise the concept of growth decay and he's meant to be the (self proclaimed) tech expert.

50% = 1.3m in 2 years! What is the guidance/forecast for 2016?

[Baa_Baa]

50% = 1.3m in 2 years! What is the guidance/forecast for 2016?

You have to read between the lines Casino. Rod is not like any other CEO who has a comms teams vetting every message to the market, though he seems to need it, The guy seems to be a train wreck in the making! The directors will be carefully monitoring his off-the-cuff prognostications, product announcements, strategic directions and cavalier attitude to investors expectations.

Here's a CEO who says that the company wouldn't hire him now, but they do need him to evangelise the story, which is why the board keep him on. He is a tech geek who has a vision which is funded by his shareholders and his story is morphing from SME accounting to big data. Who can value that? Some would say 'believe the story', fair enough as that's all there is to believe in. The only thread of credibility remaining in conjunction with shareholder values is that he still owns a lot of XRO.

If you pick apart the inconsistencies with the story as Rod tells it, versus the reality of declining growth in established markets and an uncertain re-boot of the USA story, you're left with a company that doesn't make any profit, isn't prepared to project when they will be profitable (return on investment), cannot be valued, and is grossly overpriced on-market based purely on sentiment.

This is an impossible proposition to realistically buy in to. Isn't it?