Xro - xero

[mikeybycrikey]

Exactly, building API's for the few NZ and Aus banks will seem simple compared to the USA .. from Wiki there are 6,799 FDIC-insured commercial banks in the United States as of February 11, 2014

Maybe they'll find a SaaS provider who has already built API's to the USA banking sector, and partner with them, like they did for Tax which is also massively fragmented. Would be interesting to know how Zero are tackling this banking integration challenge.

They already use Yodlee (https://www.xero.com/blog/2010/01/xero-and-yodlee/) which provides this service for them globally. I'm guessing that it doesn't provide everything that they want because otherwise they wouldn't be trying to expand their own range of bank feeds.

edit: Here is a blog post from four years ago with more detail on Yodlee and bank feeds https://www.xero.com/blog/2012/10/si...of-bank-feeds/

[Santiago]

Just read the presentation for a second time. I'm not expert on SaaS companies, as some of you may be, but I've always thought (and posted here) that the results when based on an online subscription model need to be read differently to the results of other types of company. That's why I take a dim view of people who only note cash burn, without providing the context (what the company is buying with that cash burn). In that sense, and reading them again, I reckon the key metric to watch is LTV (life time value)- LTV per customer has grown from $1700 to $2100 and total LTV of all current customers has gone from $823m to $1.5b (based on current LTV- remember this is improving so that 1.5b of value currently held in existing customers is likely to increase, along with any increase resulting from additional customers). That's an 83% increase in value that the company can reasonably expect to extract on current numbers from their investment. The subscription model accrues 100% of acquisition cost in the current year and delivers the value of that investment in future ones, which I think tends to distract some on this thread who don't understand the bigger picture. As such, on a second reading I'm seeing a very good result- an 83% growth in "stored value" while the value per customer is also improving, and new customers are being added.

Added to that, the SP has not budged for some time now. Anyone buying now is getting a lot more value per share than they were a year ago. I have held for some time, but I reckon that these numbers make Xero a pretty compelling investment at current price, that has been significantly de-risked in that total LTV is around 75% of the company's market cap (not including cash on hand) and all metrics are improving. Still risky in the sense that the US investment has question marks around it, but at the same time in terms of the total group that play is not dragging the rest of the metric improvement backwards by any means.

So, while there's been a truck load of debate, a lot of it pretty one-sided and one-dimensional, my question is- is Xero now a good buy and hold investment, or is it still too risky?

Interested in others' views. Mine is as follows: I wouldn't recommend it to my mother, but I would to someone who has got a reasonable time horizon.

[Leftfield]

Just read the presentation for a second time. I'm not expert on SaaS companies, as some of you may be, but I've always thought (and posted here) that the results when based on an online subscription model need to be read differently to the results of other types of company. That's why I take a dim view of people who only note cash burn, without providing the context (what the company is buying with that cash burn). In that sense, and reading them again, I reckon the key metric to watch is LTV (life time value)- LTV per customer has grown from $1700 to $2100 and total LTV of all current customers has gone from $823m to $1.5b (based on current LTV- remember this is improving so that 1.5b of value currently held in existing customers is likely to increase, along with any increase resulting from additional customers). That's an 83% increase in value that the company can reasonably expect to extract on current numbers from their investment. The subscription model accrues 100% of acquisition cost in the current year and delivers the value of that investment in future ones, which I think tends to distract some on this thread who don't understand the bigger picture. As such, on a second reading I'm seeing a very good result- an 83% growth in "stored value" while the value per customer is also improving, and new customers are being added.

.

Market seems to agree with you today Santiago. I think your point re growth of LTV is good. Disc.I'm holding a small parcel and content.

[Longhaul]

Nicely put Santiago. If you're comfortable with the risk then it's worth it in my opinion. Can't think of any other nz companies with quite the same potential over the next 5 years.

A lot of comments on here try to compare apples with oranges which isn't all that useful. Familiarity with SaaS metrics is a must in order to understand what game Xero is in.

Of course there is a chance they will not meet their expectations, but they have a pretty good platform to do it from now. Each to their own huh.

[mondograss]

I actually do hold a decent parcel of these and think they have a good future, so I'm happy to hold long-term and see how they go.

[mikeybycrikey]

Interesting article about First NZ Capital's expectations for Xero: http://www.scoop.co.nz/stories/BU160...hree-years.htm

They are expecting 1.32 million users in 2 years (I guess they mean end of FY2018). This is a significantly slowing of growth to only 35% per annum, although this mostly matches my estimate too.

[winner69]

Like a proud dad tweeting the success of his kids

@roddrury: Cool metric just noticed. @Xero has received $473m in total funding and delivered (to March 16) $472m total revenue. That’s pretty cool.

[Beagle]

Interesting article about First NZ Capital's expectations for Xero: http://www.scoop.co.nz/stories/BU160...hree-years.htm

They are expecting 1.32 million users in 2 years (I guess they mean end of FY2018). This is a significantly slowing of growth to only 35% per annum, although this mostly matches my estimate too.

I liked this bit from article...something investors might like to keep in mind with the size of their allocation to this company, if any, emphasis added.

Xero has remained "an extremely high-risk investment" because of competition from incumbents such as Intuit, Sage and MYOB, internet security, execution, managing growth and geographical spread, key man risk, especially around founder and chief executive Rod Drury, service pricing and the risk of short-term stock price volatility, Schofield said.

[Santiago]

Surely the first time in a while XRO has fallen back to page 5 on Sharetrader...

http://www.stuff.co.nz/business/indu...-financial-web

More positive news from the US...

[longy]

Xero signs up Wells Fargo, a sign of 'good progress' in the US

http://www.stuff.co.nz/business/indu...-financial-web

I don't know about you fellas but news like this can't be bad...