That will be some exceptional growth. Have you worked out how they would achieve that - 300%+ in the US and 80%+ everywhere else?
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Yes all good exponential growth such a great term, but difficult to sustain.
And to date there exponential growth has come from NZ & Australia where growth is growing & that will continue to do so.
To date they have shown little evidence that they can grow the US business at anywhere near the rate to make up for the slow down in growth that expected in NZ & Australia.
my view is that Accel don't invest lightly. This is like a late-stage investment for them (a la Facebook), albeit a publicly-listed one. They didn't buy in to see a share price of $15 or $18 or even $30. It would not surprise me if they bought at $20 with expectation of an exit upon US listing @ $40+ in 12 months. They will also help make that happen - with their connections and track record, as evidenced already by the people that have joined in the US. It's a self-virtuous circle. Trying to analyse the fundamentals from outside is difficult. I trust Accel to have done that in far more depth than we have and with access to inside information.
Hmmm, my reply probably was a little more patronising than intended. Apologies for that.
Just an additional thought on the expenses.
As the annual report sees it, there are three different types of expenses going on:
1. software development/R&D. This appears to be increasing exponentially at the moment for two reasons: because they have got the money to spend and to rapidly improve the product. This expense should tail off in its growth and isn't really tied to the number of customers.
2. marketing: this expense seems to be growing faster than anything else at this stage. This is also showing exponential growth as it is (hopefully) linked to the number of new customers gained. I expect that growth in marketing should decrease over time as the product becomes more well-known. They have been getting poor value-for-money in the US from this part of the budget. (did the annual report say that CAC was about $5000 in the US?)
3. customer service: this is and should always remain linked to customer numbers. There is a cost in providing the service to customers although there should be some efficiencies gained by scale.
So, as the company grows, (3) should increase linearly with number of customers (i.e. exponentially) and (1) and (2) should decrease on a per customer basis.
But of course reality might work differently than the theory. There is always the Amazon model where income and expenses both increase exponentially with the promise of future profits than never eventuate.
Are you trying to say that they're not going to have 3.3 billion customers by 2030? :)
More seriously, I'm fairly confident that Xero will have 100,000 UK users within the next two or three months. Growth there is picking up. Although to sustain 80% growth for the next year means getting close to 400,000 new users in FY16.
I might expect that might include 150k new users in Aus, 100k in UK and a handful of thousands in NZ but that leaves them at least 100k users short of 80% growth unless they can get a lot of new US users.
Harvey,
Roughly yes. On a base of 22k us customers 300% subscription growth in the US is pretty achievable or even easily achievable wouldnt you say? Their latest aquisition should add at least 200%. Again im a total newbie but i expect something closer to 4/500% growth in the US in the short/near term.
Ginger, you have obviously been listening to Rod!
That's some pretty lofty expectations you have there for the US business.
By the valuation put on the company I would suggest you aren't the only one.
Xero wins Aus and NZ and will get there too in the US of A. http://www.fool.com.au/2015/02/27/has-xero-already-won/
Just as an aside there is some damn heavy buying going on especially around $24.60...someone must have a take on it all....