Xro - xero

[kizame]

Wasn't Rod Drury involved in another listed company a few years ago,I'm pretty sure it had something to do with accounting then too.
Anyone remember?

[Toasty]

Wasn't Rod Drury involved in another listed company a few years ago,I'm pretty sure it had something to do with accounting then too.
Anyone remember?

Not that I recall. He was Glazier Solutions sold to Advantage for about $7 mill. Then Context Connect which was a speculative play that produced some patents and is still doing something in the background. Then it was Aftermail which was private and sold to Quest in the US. I might have missed something...

[kizame]

Thanks Toasty,I must be thinking of someone similar,a few years back.

[Toasty]

Hi all - I'm trying to learn why the share price in this company is skyrocketing ... all I see is no net earnings - thus no dividends, no tangible assets ...NTA at about 14c per share, no volume trades, CEO Drury saying no NP for a couple of years yet, Drury & Co selling down, monopoly position, revenue doubles in last 12 mths etc etc..... does anyone know what is keeping the XRO bubble from bursting? Can someone please educate me?

I see it as a hugely ambitious venture with a potentially massive payoff if the takeup by the global market takes off. I like the reinvesting for growth strategy as I believe they may as well reach for dominant position rather than become another minor player in the accounting software space. Having said that I am not so naive as to think that things are all plain sailing and that nothing could go wrong. I do however believe in the ability of Xero to pull it off. It always amazes me to read the personal shots and references to a Ponzi scheme comments in the NBR articles. I find it hard to believe there is such a depth of negative feeling by some in the investment community.

[Zaphod]

100% growth per year in all the markets the are targeting (NZ, AUS, UK and US).

WHile I think they are overvalued (depends on levels of growth you factor in), looking at their NTA is irrelevant.

Look at facebook. It had NO revenues for its first few years, would have next to no assets. It is all about number of users where youcharge them directly (eg. Xero) or through advertising (eg. Facebook).

Paying customers by segment At 31 March 2011 At 31 March 2012 Year on year
change
New Zealand 23,000 47,000 104%
Australia 6,000 16,000 166%
United Kingdom 5,000 11,000 120%
United States/Global 2,000 4,000 100%

Yes they doubled the subscriber numbers, but once the subscriber numbers climb for a couple of thousand to tens of thousands they keep it up? That's the question.

To become profitable, not only will the subscriber numbers have to rise sharply, but they will also have to ensure the product reaches a level of maturity where-by the development costs can be decreased.

[CJ]

Paying customers by segment At 31 March 2011 At 31 March 2012 Year on year
change
New Zealand 23,000 47,000 104%
Australia 6,000 16,000 166%
United Kingdom 5,000 11,000 120%
United States/Global 2,000 4,000 100%

Yes they doubled the subscriber numbers, but once the subscriber numbers climb for a couple of thousand to tens of thousands they keep it up? That's the question.

To become profitable, not only will the subscriber numbers have to rise sharply, but they will also have to ensure the product reaches a level of maturity where-by the development costs can be decreased.

Market share in NZ is still growing at 100% which is positive - currently at 10% market share (http://www.stats.govt.nz/browse_for_...s_MRFeb10.aspx). Market share in the other countries is minimal so no issue getting 100% growth per year. Especially in the US. Now they are starting to make a push there (they had to develop a cheque printing module as they still pay via cheque/checks over there) I would be disappointed if they dont have a couple of 200%+ years - getting over 1,000,000 customers shouldn't be an issue provided they continue to lead the pack as far as development goes. Quickbooks has about 4m from what I can find online.

as far as getting customers go, remember they are targeting accountants, not end users. So for every new accountant they sign up, that brings in 20-50+ new customers as they transition them onto Xero over the next few years.

[Zaphod]

as far as getting customers go, remember they are targeting accountants, not end users. So for every new accountant they sign up, that brings in 20-50+ new customers as they transition them onto Xero over the next few years.

Have you seen the average percentage of the Accountant's clients that are migrating to Xero? IMO, that sales model is preferable, but it would be interesting to know how how well it is actually working.

Developing Xero for the NZ & AU markets is a relatively simple task, however the complication with the US is the vast differences in local state tax law and regulatory requirements raises development and maintenance costs significantly. Something to watch....

And yes, the US obsession with cheques certainly makes things look antiquated in many respects!

[Dentie]

Thank you all, nice to be able to pick up on quality knowledge ....... to late to get in now

[stoploss]

never too late,just think if you missed AAPl @ $ 10.00 or $ 20.00 it wasn't too late at 100 or even 200 !!!!

Thank you all, nice to be able to pick up on quality knowledge ....... to late to get in now

[Dentie]

Forsyth Barr have issued a "REDUCE" recommendation on Xero today, saying thus:

XRO has released its key metrics for the year ended 31 March 2012,with revenue increasing to more than $19m, in line with our forecasts.XRO’s customer numbers increased to 78,000, which was ahead of our71,000 forecast, but ARPU is significantly lower than expected.

What’s changed?

• Earnings Impact: FY12 EBITDA lowered -0.6% to -$6.7m; FY13increased +0.7% to -$7.6m.
• Valuation Impact: +45cps to $3.15.
• Recommendation: Downgraded from HOLD to REDUCE.

Gee, it's that lack of positive earnings that makes them a shaky bet for me .... despite all the growth