Xro - xero

[Daytr]

Bilbo, this is the problem I have had with some people's sales projections. They have basically been projecting multiples or percentages off previous sales & that those multiples or percentages are maintained. Whereas I think its likely, even though the number of clients gained may increase each year, ie. growth on growth, the multiples or percentages will actually drop. Particularly as XRO have already admitted that in the US they have to go out & get business face to face, rather than hoping that businesses will sign up on-line. This is a very intensive & expensive way to bring in clients for what is a relatively small paying service.

[Harvey Specter]

A little concerned that it took 2 months to get from 475K to 500K customers.

They could just be rounding down.

I wouldn't read anything into it.

[winner69]

Bilbo, this is the problem I have had with some people's sales projections. They have basically been projecting multiples or percentages off previous sales & that those multiples or percentages are maintained. Whereas I think its likely, even though the number of clients gained may increase each year, ie. growth on growth, the multiples or percentages will actually drop. Particularly as XRO have already admitted that in the US they have to go out & get business face to face, rather than hoping that businesses will sign up on-line. This is a very intensive & expensive way to bring in clients for what is a relatively small paying service.

Right on ..... It's called growth rate decay ....growth rates gradually decline (but sales/customer numbers still increase.)

At least they half way to a million now.

[pierre]

Well...a pretty disappointingly subdued response to the announcement of very significant milestone for XRO.

500,000 customers is a magnificent achievement that we should be applauding loudly and congratulating Rod and the team for their drive and determination in reaching the half-way mark towards their lofty goal.

I'll bet when they set that BHAG (Big Hairy Audacious Goal) a few years back, a million customers must have seemed like aiming at the moon. Well the target certainly appears to be within reach now - even if the growth rate might be a little slower in some months compared with others and profits are still distant on the horizon.

I often think of the path that SKT followed - reporting losses year after year as they invested in growing their customer base - before reaching the tipping point and becoming a pretty productive cash cow. A few more years and we're sure to see the same outcome for Xero, unless it gets snapped up earlier by a smart buyer.

There's probably a Microsoft, Apple, Amazon or the like, who can see and understand the end game, that's watching and waiting for the right time to make their move. The questions are ....who and when?

Anyway - well done to the XRO team - a marvellous achievement and I hope you opened a few bottles of bubbly to celebrate. Onwards and upwards to the one million target.

[pierre]

From today\'s NBR Online:

Xero [NZX: XRO] has passed another key milestone in gaining half a million customers, having grown ten-fold in the past four years.

Speaking from a conference Xero is holding in Denver, founder and chief executive Rod Drury says he expects Xero will reach the millionth customer mark in less than another four years but he won’t be drawn on when his company will become profitable.

“It’s not all that relevant anyway, because our business has changed so much in the last three years (since he set the target of gaining a million customers),” Mr Drury says.

A key question continues to be how fast and to what extent Xero can build its customer base in the US.

At the conference, Xero has announced it is working with Apple and other companies in the US, including Avalara, which sells software to deal with sales taxes, bill.com and Mindbody.

Apple will be using Xero as its platform for small businesses in a similar way to what it did with IBM in the enterprise space, Mr Drury says.

Mindbody will be using Xero’s software in 42,000 gyms in the US, he says.

“I think that answers a big question around our US performance,” he says. “We’ve always said it wouldn’t be us on our own, it will be working with partners.”

Forsyth Barr analyst Blair Galpin says Xero has announced such partnerships before.

“All of those things are positive but we need to see them convert into actual sales.”

A good result
Mr Galpin says reaching the half million subscriber mark is a good result.

“They were always on that trajectory – we knew they were fairly close,” he says.

The accounting software company had 475,000 customers at the end of March.

The company gave no breakdown of where the growth came from but Mr Galpin says most of it will have come from the strongly growing markets of Australia and the UK.

Mr Galpin says, given the current run rate, it would be expected to take less time to reach the million mark than the four years it took to grow from 50,000 customers.

“The run rate is ramping up every year.”

Although some people remain sceptical of Xero’ value as it continues to chalk up growing losses, “half a million customers suggests there’s a core business there” in New Zealand, Australia and the UK.

That’s despite the still unanswered questions about how much traction it will gain in the US, Mr Galpin says.

Xero shares are unchanged at $20.40 and have gained 26% this year, spurred by February’s announcement the company had raised a further $147.2 million from Silicon Valley investors, though they’re still well shy of their peak at $45.99 early last year.

[Casino]

From today\'s NBR Online:

Xero [NZX: XRO] has passed another key milestone in gaining half a million customers, having grown ten-fold in the past four years.

Speaking from a conference Xero is holding in Denver, founder and chief executive Rod Drury says he expects Xero will reach the millionth customer mark in less than another four years but he won’t be drawn on when his company will become profitable.

In other words, growth will average around or a bit better than 20% over the next 4 years?

[Baa_Baa]

In other words, growth will average around or a bit better than 20% over the next 4 years?

And when did the 4 year clock start ticking? “It’s not all that relevant anyway, because our business has changed so much in the last three years (since he set the target of gaining a million customers),” Mr Drury says.

[Xirr]

In other words, growth will average around or a bit better than 20% over the next 4 years?

It will get there in 2 years (which is less than 4 years) I reckon averaging 50-60% growth, maybe a tad more.

Lance wiggs gets way too much airtime. His forecasts don't seem to recognise the concept of growth decay and he's meant to be the (self proclaimed) tech expert.

[Casino]

It will get there in 2 years (which is less than 4 years) I reckon averaging 50-60% growth, maybe a tad more.

Lance wiggs gets way too much airtime. His forecasts don't seem to recognise the concept of growth decay and he's meant to be the (self proclaimed) tech expert.

50% = 1.3m in 2 years! What is the guidance/forecast for 2016?

[Baa_Baa]

50% = 1.3m in 2 years! What is the guidance/forecast for 2016?

You have to read between the lines Casino. Rod is not like any other CEO who has a comms teams vetting every message to the market, though he seems to need it, The guy seems to be a train wreck in the making! The directors will be carefully monitoring his off-the-cuff prognostications, product announcements, strategic directions and cavalier attitude to investors expectations.

Here's a CEO who says that the company wouldn't hire him now, but they do need him to evangelise the story, which is why the board keep him on. He is a tech geek who has a vision which is funded by his shareholders and his story is morphing from SME accounting to big data. Who can value that? Some would say 'believe the story', fair enough as that's all there is to believe in. The only thread of credibility remaining in conjunction with shareholder values is that he still owns a lot of XRO.

If you pick apart the inconsistencies with the story as Rod tells it, versus the reality of declining growth in established markets and an uncertain re-boot of the USA story, you're left with a company that doesn't make any profit, isn't prepared to project when they will be profitable (return on investment), cannot be valued, and is grossly overpriced on-market based purely on sentiment.

This is an impossible proposition to realistically buy in to. Isn't it?