Accounting, Fintech, Technology

Getting SaaSy Part I

As part of my ongoing mission to contribute to the thinking on the SMB Accounting tech industry for the broader market, I thought I would sit down and provide some analysis and commentary on the relevant, listed players in AuNZ. I start with the ASX and NZSE players MYOB ($MYO), Xero ($XRO), Reckon ($RKN) and JCurve ($JCS) and will publish part 2 next week, for the major international listed entities operating in AuNZ Intuit ($INTU), Netsuite ($N) and Sage ($SGE).

The listed players obviously provide a level of transparency (I say that with distinct emphasis on “a level of”) we can’t get from privately held entities. As we stand, we are in transition from Desktop to Cloud. Box-moving to SaaS. It is frustrating the lack of modern, SaaS metrics from the key players as companies pick and choose which metrics to publish at their own free will.

But really, nothing has changed. I lost faith in traditional P&L metrics for our industry, long ago. Software companies have long played games between Balance Sheet and P&L – in areas like “Capitalised Development Costs”, “Intangible Assets” and “Deferred Revenue” to adjust EBITDA numbers especially.

Anyway, I look forward to the age of the SaaS metric aware investor and listed entities who provide such data. In their absence, I’ve pulled together what I can, with commentary.

Just a note before we begin: By market-share, assessing the listed entities does cover off the main players (plus JCurve). By my calculation Saasu is possibly the most relevant, not small, privately held local player in AuNZ. Being private, obviously I have no access to data to assess.


MYOB – Overview

57.7% owned by Private Equity (Bain). The Australian and New Zealand incumbent, based on being the Windows disruptor in the 90s. Clearly acquisitive to meet prospectus targets. Bain can exit at year end, which I fully expect.

Suffer at the hands of the very Australian, very unfortunate cultural habit of “tall-poppy syndrome”. Seem to me to be bashed mercilessly by some, simply because they have been the successful, established player.

Being able to transition technology, clients and channel through the seismic shift that is Desktop to Cloud accounting, was never going to be easy. Yes they’ve had ample flaws on the way through. No they probably haven’t handled it as well as their equivalents Intuit in the US, but they seem to me to be “catching up” and will provide greater resistance in future to further disruption/market share capitulation to Xero.

The Numbers

Recent published results for 2015. Claim ~1.2m customers with less than half paying ongoing (545k). 1,300 odd staff. Current market cap ~ $1.875b on revenue of $328m last year, the biggest by revenue, by a long way, of the players analysed (market cap to revenue 5.55X in the middle-range for the companies analysed). 14.1% YoY growth inclusive of acquisitions and price increases.

Sizable long-term debt at $438m or 1.5 times annual revenue, which was in fact a massive YoY decrease of $700m. The best I can tell, swapped to equity (which went up $766m ) through the IPO.

Intangible assets & goodwill of $1.219b. Interesting number – key “hiding spot” in P&L/Balance Sheet games for software companies. In MYOBs case obviously includes acquisitions (IMS, ACE etc), but seems big to me at 4X annual revenue. Ultimately has implication on depreciation in the future. A fact Archer was able to exploit by taking MYOB private in the past to narrow gap between EBIT and EBITDA.

No easily findable/calculatable SaaS metrics.

Metrics Value
Annualised Committed Monthly Revenue (ACMR) ?
Active Subscriptions 545k / 170k “online users”
SME Average Revenue per User (ARPU) monthly ~$31.60
Customer Acquisition Cost (CAC) ?
Customer LifeTime Value (CLTV) ?
Churn ?


Australia and New Zealand only regional player. Jettisoned international operations, to focus on the fight with Xero and maintenance of their existing market position.

Not sure how stringent they’ve held to the AuNZ strategy with acquisitions (Pay Global had/have a fair footprint in Pacific Islands).

I fully expect expansion of international markets as products (like Essentials) mature.

Accountants and Bookkeepers core aggregation channel in S end of SMB. Specialist software consulting firms taking Exo/Advanced to market.

Product Strategy

Multi-product strategy. Entry level accounting to enterprise + Accounting Practice solutions. Similar product strategy and thirst for acquisition to their UK equivalent, Sage (without the international footprint).

Core products moving forward (and there are many, many more existing products in their stable):

  • Essentials – true cloud accounting system, clearly the core SMB product of the future
  • Not AccountRight – clearly a temporary “fat client”, cloud db solution. Will ultimately be replaced by Essentials (which I think will need to be renamed as its featureset continues to expand beyond “Essentials”), surely.
  • Advanced – licenced Acumatica platform. Mid-market ERP. MYOB seem to be selling down market of where Acumatica target world-wide. Seriously deep, customisable platform, which I see as THE genuine competitor to Netsuite. Established channel and “fish in a barrel” upgrade targets via Exo.
  • MYOB Advanced Payroll – yet to be officially released, obviously the reason for the recent acquisition of Pay Global, Ace and IMS payrolls in NZ. Will come as a full-serviced offering to compete with the likes of ADP as well as process-yourself online offering.
  • MYOB Accountants’ Practice Solution – MYOB seem on a path to Cloud Practice Management, via the MYOB Dashboard product. This will take years to replace AE/AO.

Charge client-side and advisor-side. That is charge for client applications and accountant’s applications.


Expansive ecosystem (claim in excess of 3,500 “add-ons”). Growing APIs by product. Zero APIs with AE/AO, accessible client-app APIs (Essentials/AccountRight Live/Advanced).

Also strategic investments in ecosystem like Kounta, OnDeck etc.


Fintech savvy, investing in Australian division of OnDeck (which Intuit have partnered with in the US) – SMB loans platform, clipping the ticket on loans by providing access to SMBs and holding shareholding in the platform.

Similar arrangement with Mint Payments (ASX listed $MWN), with MYOB Pay Direct, clipping the ticket on SMB mobile payments.

Big Data and Machine Learning/Ai

Has been mentioned by key exec as core strategy moving forward. Not really seeing much in the products yet. Have native OCR built into AP, an obvious area for AI (enough acronyms in one sentence?). Multi-product, code-base strategy will create complexity around Big Data/Ai across the product suite.


Xero – Overview

Like many good Aussies (Crowded House, Russell Crowe, Richard Wilkins…), born in New Zealand, made big in Australia. 🙂

Clearly the disruptor. Cloud born and bred, pure SaaS company, who publishes relevant SaaS metrics (yay). Growth focused.

Funded via equity, clean balance sheet as far as debt (something I am clearly not smart enough to understand). Have never come close to profitability as investors have funded the “grow at all cost” strategy. Historically acquisitive of eco-system, now seem to have the mature platform and resource to develop rather than acquire (to the disappointment of some eco-systems partners who’ve long hoped for the call from uncle Rod to buy them out and save them from commercial reality).

Moving the cloud accounting debate from espousing the benefits to assuming everyone now just gets it.  “Cloud 2.0”, leveraging their large client base to evolve the platform into Fintech, Machine Learning, Data mining, “clip the ticket” partnerships etc.

The Numbers

NZ EoY approaching, no recent detailed update. Some numbers I’ve projected/estimated.

Nearing 700k customers (announcement soon?). Currently the largest of the ASX listed SMB Accounting Tech with a market cap just above MYOB at ~$1.9b on committed revenues around $220m (current revenue to market cap of somewhere around 10.4X, recently reported the largest for listed SaaS companies worldwide). Slipping growth rate still around 50-60% YoY (most recently quarterly growth (as measured by cash flows) slowed from 19% to 9%, blamed on currency fluctuation).

$65m in Intangible assets.

Zero long-term debt – surely this leaves ample room for Xero to end its capital raising appetite. Competitors have seriously leveraged debt for growth. Never made a profit and thus have never paid a dividend.

SAAS metrics:

Metrics Value
Annualised Committed Monthly Revenue (ACMR) ~Au$220m / ~Au$150m AuNZ
Active Subscriptions (estimated) ~$700k / ~475k AuNZ
Average Revenue per User (ARPU) monthly ~Au$28 / ~Au$26 AuNZ
Customer Acquisition Cost (CAC) 13.7 months overall / 9 months AuNZ
Customer LifeTime Value (CLTV) ~Au$1,610 / ~Au$1,875 AuNZ
Churn 16% / 12% AuNZ


Worldwide footprint. >1,300 staff. On track to displace MYOB in AuNZ as #1 small business accounting product (nearly 3 times the number of cloud subscriptions and growing many times faster). Level pegging with Sage the incumbent in the UK. Competing hard with a multitude of “Intuit disruptors” (including Freshbooks, Wave, InDinero, Kashoo, Intacct…) and Sage in the US, where they have disappointed against high expectations, but persist due to the opportunity size (though strategy/expectations seem to have shifted from displacing Coke (Intuit) to becoming Pepsi). Expanding into Asia and Africa next on the agenda.

Accountants (and to a lesser extent, Bookkeepers) core aggregation channel. Now promoting the new “CSP” (certified solutions professionals) channel – effectively this channel is the new-wave, what was traditionally software consulting firms that many mid-to-enterprise packages have relied upon (as was one of my previous businesses).

Product Strategy

Single platform/single code-base (kind of, not really – elements such as payroll (Pay Cycle/Monchilla) and Workflow Max acquisitions were different companies, different code-bases that have been “merged in”).

SMB platform + Practice Management (Workflow Max) + Tax (in Australia) – Xero HQ offers Accountants, Advisors & Bookkeepers central client management hub.

Charge client-side – that is charge by client dataset, advisor tools free. Strategy is clearly “get all your clients on Xero – with add-ons, Xero suits every SMB”.


Mature, expansive “omni-channel” eco-system of well integrated products. 500+ listed add-ons. Has very much been central to the “single platform” product strategy. Have been the leaders in “beautiful” open APIs. This strategically has filled functionality gaps whilst the platform was being built and moving forward, allows Xero (the product) to be kept at the core as the business customer grows.


Claim an “open platform” for Fintech. Don’t want to be perceived to be “playing favourites”.

Now offer Veda credit checks native – surely clipping the ticket (and if they aren’t – like recently claimed when I spoke to a senior exec – why the heck not? Seriously!?).

Offer NAB SMB loans to Xero users who have linked NAB accounts for auto-bank rec. Are paid a commission/spotters fee on the loans.

Direct feed of invoices from key utility providers.

Big Data and Machine Learning/Ai

Certainly talking up Big Data and Ai as key future focus now they have a significant client base on board. Not really seeing much in the product yet, but Rod Drury has been consistent on the future of accounting tech for a very long-time, and now the market and client base seem ready.


Reckon – Overview

Former partners of Intuit, who had been regionalising and distributing Quickbooks desktop in Australia since the mid-90s. Now divorced from Intuit and the use of the QuickBooks brand, have really been blindsided by the trifecta:

  • Break-up from intuit
  • Cloud Accounting
  • Microsoft canning Silverlight (the platform they were using to develop ReckonOne)

Run by very savvy business minds, who have made some seriously smart acquisitions (APS was probably the smartest buy in accounting tech I’ve witnessed) and focused on the traditional fundamentals (revenue and EBITDA growth). APS is/has been dominant in Practice Management space into the larger firms particularly. Document management (another very savvy acquisition) has been a real growth engine.

Very much behind the 8-ball on Cloud (though hosting the desktop product has been effective). ReckonOne will struggle. Still no payroll. Very crowded, competitive SMB market now. APS whilst a good product by all accounts, is desktop-based and must be eyeballing end of life timelines.

The Numbers

Share-price spiked on rumours of a trade sale to MYOB or Sage. With Clive Rabie declaring they are “going it alone”, share-price has now nose-dived. I still am predicting a break-up to maximise shareholder value.

Market Cap fluctuating markedly, now ~$170m on revenue of $105m (market cap to revenue 1.6X). 300 odd staff. 4.3% YoY growth inclusive of acquisitions and price increases. 3.9% dividend yield the best by far of the analysed companies. Sizable long-term debt at 0.55 times annual revenue on debt to equity ratio of 147.1%.

Intangible Assets of $89m a marked increase of $56m YoY (inclusive of acquisitions I assume).

No easily findable/calculatable SaaS metrics.


Core market is Australia. Small presence in New Zealand. International presence with APS and Document Management. Have flagged desire to take ReckonOne international, particularly UK and US.

Have an established, but wavering channel of software consultants, bookkeepers and accountants. Have extreme competition with Intuit coming direct (the Reckon channel were “QuickBooks” consultants – Intuit, the developer of QuickBooks, offer QuickBooks Online), Xero, Saasu and Sage all trying to establish/grow aggregate channels to market.

Product Strategy

Espousing a 3 company divisions/product strategy:

  • SMB accounting software – effectively ReckonOne moving forward (knowing Reckon Accounts desktop (formerly QuickBooks) is end-of-life, though Hosted has proven very successful for them). Point of difference claimed in “modualisation” and very low price entry point.
  • Accountants Practice Management (APS) – key revenue stream, key growth area (revenue-wise) – where’s the Cloud Practice Management? (South Africa perhaps…?)
  • Virtual Cabinet / Smart Vault – Document Management

Sync Direct – an acquisition that seemed to take forever to be released, offers accountants with APS a “SMB accounting tech agnostic” opportunity. Similar to Common Ledger, its about 2-way sync’ing with clients regardless of their system.


Completely immature. Racing to catch-up on reliable, public APIs across their product suite.


Have Reckon Pay “Coming Soon”. Other than that I’ve heard nothing of any Fintech strategy.

Big Data and Machine Learning/Ai

I have heard nothing of any Big Data/Ai strategy.



JCurve – Overview

Effectively a distributor of “cut-down” Netsuite, not a developer of an accounting platform. Focus on the smaller market that Netsuite don’t see value in targeting. A “penny stock” (0.8 cents/share at close 21/3/2016), listed via the acquisition of the Netsuite distribution agreement by a legacy telecommunications software company Stratatel, who was/is losing clients and revenue, so acquired JCurve in an attempt to give them a future/growth opportunity.

In an awkward position, completely reliant on Netsuite, which must come with cost of sales/gross margin implications and worries over control of supply. But achieving, it would appear, strong growth. Publishing SaaS metrics.

JCurve is not really a product per se, it’s a modulised version of Netsuite. It lacks bank feeds and automated bank rec, which I see as core to Cloud Accounting (particularly in the SME space). The big upside, it’s a low cost, lower risk entry into Netsuite for businesses planning long-term growth and aspiring to move to the full Netsuite platform.

To this point they have had relatively clean air in the “beyond entry level” play (few people know much about the likes of Gem Accounts and Harmoniq), but I feel they’ll have massive competition on their hands with MYOB Advanced moving forward.

The Numbers

Market Cap just <$3m (hard to justify compliance costs at this level). Total revenue ~$10m (market cap to revenue <0.3X). X staff. 19% YoY decline in revenue. Non-dividend paying (obviously), loss making company. Significant (for company valuation) short-term liabilities ($3.6m), but seemingly little non-current liabilities (<$100k). Approx. 45 staff.

As they are a mixed business (legacy telco revenue + JCurve product), they’re transitioning their numbers, I’ve tried to slice out the accounting software numbers.

JCurve (the product) now the dominate revenue stream ($2.7m for first half 2015/16). 42% YoY revenue growth (translates to a 29% increase in MRR YoY to December 2015). Approximately 550 customers (though recent update suggest 2,500 “paid subscriptions” by YE, this appears a licences number not companies – another frustration of mine, the liberal use of users vs customers).

Impressively low churn of 8.6% (for SME accounting SaaS) which reflects their targeting a more mature, “beyond entry level” customer and also comes out in the CLTV of close to $80k! The misleading part of this stat is the impact on Gross Margin from the COGS attributable to Netsuite, which I haven’t been able to determine.

SaaS Metrics:

Metrics Value
Annualised Committed Monthly Revenue (ACMR) ~$3.8m
Active Subscriptions (projected from 2016 update) ~550
Average Revenue per User (ARPU) monthly ~$580
Customer Acquisition Cost (CAC) ?
Customer LifeTime Value (CLTV) ~$80,000
Churn 8.6%


Run very much off the coat-tails of Netsuite and its strong brand and marketing. Netsuite seem to have a 20+ user licence focus and refer smaller enterprises to JCurve, which is a fertile lead source for them.

So really aiming at the larger S and smaller M space for SMBs, key selling point is “Cloud”. A lot of desktop competitors (Attache, MYOB Exo, SAPB1, Sybiz, Jiwa, Arrow…) and few Cloud competitors (MYOB Advanced, Harmoniq, Gem Accounts).

Seem to be adjusting focus to verticals such as wholesale stock/importers.

Still establishing a channel approach (noting they have been advertising for a channel manager of late). Channel includes Netsuite partners, accountants, software consultants and IT resellers.

Product Strategy

“Netsuite Lite” – those SMBs aspiring to the Netsuite brand/product, but not big enough to justify the complex ERP implementation can get JCurve “mini-ERP”.

No automated bank feeds/bank rec – for me this is a big hole when targeting SMBs and will impact them as the market becomes more aware of how much of a game changer automated bank recs are.

Client-side software, no advisor/accountant practice software.


Netsuite’s platform ecosystem, very broad and mature.


I’ve heard nothing of any Fintech strategy.

Big Data and Machine Learning/Ai

I have heard nothing of any Big Data/Ai strategy.


Honourable mention: TechnologyOne

True Aussie success story. Now able to be defined as a cloud accounting, business management platform at the enterprise end of the market (competing H2H with the big boys like SAP & Oracle). Consistent 14-16% YoY profit growth (6 straight years) – remarkable achievement when building out Cloud offerings. Market Cap over $1.45b on revenues ~$250m.

I wonder if they’ll ever come down market? At least to compete with Netsuite and MYOB Advanced in the upper M space? I think they should, specifically in their key verticals, where they excel.


Next week – Getting SaaSy Part II – the international listed players.


For more commentary by the author on Accounting & Payroll fintech:


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Matt Paff (BBus GAICD) is founder of Value Adders and a veteran of the Accounting, Payroll and broader B2B Technology industry. Matt’s resume includes time as GM at Attaché Software, one of the world’s longest surviving accounting software companies, as well as starting, growing and exiting a successful accounting technology & business process consulting firm. Matt has held advisory board positions with accounting firm Imagine Accounting as well as Governance technology start-up GovernRight. In his spare time, Matt also runs a RegTech start-up vSure. Matt is passionate about a practical, plain English perspective. He is known for being a straight-shooter and appreciated for his forthright, researched opinions.


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