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
Printable View
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
[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..
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/n...ectid=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.
Rods APPLE WATCH is flying across the Pacific at the moment in the care of one of his staff
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. ;-)
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 - here are numbers and revenues to clarify your thinking
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.
Attachment 7308
Attachment 7309
Attachment 7310
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%
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...
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 �
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)
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.
Attachment 7316
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
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.
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.
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.
I agree, it would be very interesting to see the updated numbers put through the Clare Capital analysis again.
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.
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.
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.
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.
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
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:
Attachment 7317
Source: NZ Herald http://www.nzherald.co.nz/business/n...ectid=11437425
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.
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)
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.
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!
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.
Attachment 7318
Rod likes his story about global denomination
http://www.fool.com.au/2015/04/27/is...al-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
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
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.
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.
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?
Another link from Xero's CSMO
http://blog.lucidbooks.com/qucikbook...nup-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
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)
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.
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
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...
NBR (paid content) ... the Mobile access to paywall content is still free if you go to www.nbr.co.nz
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-LIMITE...803/consensus/
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.
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.
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...een+profitable
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
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
Is it just me or is here something wrong with the page navigation on this thread, I cant seem to forward past page 433
There is only one way to get to 434-----keep posting:):)
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.
Rods happy today, proudly announcing the arrival of his new baby on twitter
@roddrury: Hello baby
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.
The baby is working -
@roddrury: Just said 'excuse me my Watch is ringing' in a presentation @VicsterNZ
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!
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/
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/articl...over-inquiries
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
Good old XRO... Always good for a bit of how do you do trading :D
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.
Wellingtonians interested in a peek over the fence might like to attend this: http://iitp.nz/events/wellington/112...nd_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."
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.
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.
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.
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 entitys 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
Baa Baa - Rod's just herding the punters along an unknown dark path, (to capital destruction?) like a herd of mindless sheep Baaaa:p
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
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.
I owe Roger and Xero an apology over confusion of what reasonable means.
Roger is a reasonable person
Fair enough. I don't bother trying to value the company. And not sure I'd invest at current share price either.
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?
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.