Interesting to note that the recent capital raising was out of the US, from funds that specialise in technology shares, and who are obviously happy with the metrics.
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On the subject of Rod speaking out
http://www.nbr.co.nz/opinion/rod-dru...antir#comments
Funny stuff
Hi Turmeric
Yes we did use slightly different numbers - we obviously didn't include exactly the figures for the minor stuff like interest and tax.
It is possible to interpret Xero's numbers in many different ways. You focused on percentages to conclude the gap between revenue and expenses was closing. I focused on the actual $ gap to conclude the gap was increasing.
Using your numbers (from post 1801) the gap between costs and revenue in the year to 31 March 2012 was $9.4 million. In the year to 31 March 2012 the figure was $15 million. If I extrapolate that trend the gap is increasing - and based on Drury's comments about doubling employee numbers in the coming year I think the gap will probably increase again.
However, extrapolation is only moderately useful in this case. For Xero to be truly successful it, at some point, needs to have a step change - a break with past trends so that revenue keeps on increasing rapidly while costs plateau or only increase slowly. What I want to hear is how Xero is going to do that and when, and so far it has given no indication of what it intends to do.
My argument yesterday was with those who argue that Xero will become profitable by cutting costs at some point. I think that is incredibly difficult for it and most unlikely.
Cutting costs may be a bit to far but how about a cost freeze. No new hires. Costs stay constant.
Those same people should be able to maint the growth at the same constant rate - especially since they sell to Accountants who sell to their clients so there is a bit of a time lag there.
I'm kicking myself. I was watching DIL at $2.20. Feel a bit reluctant to get in now.
My personal opinion is that Xero has the bigger opportunity with its potential market size, but obviously DIL is already profitable so easier to label a success by normal metrics....