Xro - xero

[lastmoa]

thanks for the article CJ. so when the scaling begins after the customers are hooked the bleeding should stop? but in the mean time losses will expand so growth cancontinue unabated. man, xro is risky as hell!

Xro, Dil, SNAKK, etc. They're all risky - that's what some of us like about them and the challenge, and potential upside they have. Otherwise you invest in Ryman, Sommerset, POT, etc.
If Xero wanted to play it to some investors they would purely concentrate on Australasia. But going big globally increases the risk, of course, and increases the reward. The recent doubling of revenue shows that they are delivering so I won't use the wording 'risky as hell. They are a ways down the road but a lot of highway ahead, so good they have cash to utilise.
'Risky as hell' could be more applied to Snakk, if all be said.
I am a holder of Xero and Snakk.

[CJ]

Are Moose's allowed to be Directors? I could fire off an email if you want.

[lastmoa]

OK Moosie so while they might be a big no-no for your investment ideology could you please explain to me/the forum how Xero might go about creating a global accounting software package without incurring losses to begin with? If you can come up with something reasonable I suggest you would be worth a lot of money down at Xero HQ.

Waiting ..... also be good to hear a similar explanation how moosie thinks Snakk may avoid same?
Agree with pthers - good clear presentation.

[CJ]

Is it rather simple to assume that if XRO does reach it's 1 million customer mark, the SP will be an 8-10 bagger from the current price of $13? Man that would be one expensive stock on the NZX by far and away!

The no no in my mind isn't the losses.

The question is does the price already factor in success which I think it does at a target of 1m customers. However, if you change that target to 4m with a 50% success, the price may be right - I haven't looked at this becuase if you use 4m, why not use 10m with a 30% chance of success.

Alternatively, it everything goes wrong in the US, they could just focus on NZ and Australia, be profitable and be worth (say) $500m.

[blah]

The no no in my mind isn't the losses.

The question is does the price already factor in success which I think it does at a target of 1m customers. However, if you change that target to 4m with a 50% success, the price may be right - I haven't looked at this becuase if you use 4m, why not use 10m with a 30% chance of success.

Alternatively, it everything goes wrong in the US, they could just focus on NZ and Australia, be profitable and be worth (say) $500m.

I agree. The biggest question mark is over how other investors have valued Xero so far: what sort of expectations they have priced in and whether or not these are reasonable.

In general I am not too bothered with Xero making losses. I am guessing that most of the costs are involved in enticing new customers to sign up. If this is the case, then profits can be made simply by freezing new signups and milking the existing customer base on the assumption that they stay with Xero. In any case, current losses are not all that relevant when future profits are more important.

I think the quote by Intuit's CEO is pretty encouraging though:
"I admire them. I think Rod Drury and the team have built a really good company, they have built a very easy and compelling product. We've learned some things from Xero that are helping us think differently, which is the highest compliment you can pay to someone who competes in your space"

[blah]

As they always say, buy low, sell high! I think anyone buying now for XRO has missed the greatest part of the party.

I think for the case of Xero, it should be more like buy high and (hopefully) sell higher. At any point in time, Xero did seem very expensive; and yet it has soared even higher!!

[lastmoa]

I think for the case of Xero, it should be more like buy high and (hopefully) sell higher. At any point in time, Xero did seem very expensive; and yet it has soared even higher!!

because they keep delivering on their story and the 1mill goal does appear to be more and more feasible.

[Schrodinger]

lol, I don't offer solutions, I am merely looking at it from an investor perspective, which means returns and a profit are the biggest driver. If you put any other company into the equation with continually mounting losses over 5 years, where would they be right now?

If XRO goes under I will be the first to put up my hand to curate the museum where their HQ is now (I love Wellington and that building is kind of cool). That's the only way I'm getting into XRO HQ!

Go check the Amazon numbers from their first years. They incured huge losses.

I havent looked lately at the Google P&L but I doubt it was that great at the start. In order to build a platform and globally dominate you need to do a land grab. For a SaaS business this means up front losses. The most important metrics are customer acquisition and retention. Thats the only numbers I am looking at with Xero at this stage.

[Toasty]

Just finished the presentation. Hard not to be enthusiastic after that. I am either easily influenced or they have a compelling story. I feel like I am in at the ground floor of a Google/Amazon/Worldcom success story.... Yay.

[CJ]

Here's the slide for people interested relating to Saas Growth Attachment 4545

Interesting that they reference Matrix Partners as they published the Blog Sparky has previously linked too: http://www.matrixpartners.com/blog/s..._what_matters/

So while they publish that graph that looks pretty impressive, they don't publish any of the metric for us to determine whether they will ever get on the upside of the hockey stick growth - like churh and CAC