Accounting, Future, Technology

My titbits from Xero’s AGM

I had the pleasure of attending my first Xero AGM this morning. With the share price up 6.5% today, I wasn’t the only one who got swept up in the positive vision, confidence and passion that was presented!

Whilst there wasn’t a lot of new information above and beyond the already released Annual Results (which I wrote about in my subsequent article), I took a few tasty titbits away that I thought were interesting:

Growth in three levers/strategies:

  1. Expanding markets – expanding penetration within markets (4 core markets Aus, NZ, UK and US) and expanding geographical markets (such as SE Asia and South Africa)
  2. Servicing larger customers with a more “complete” product offering
  3. Attachment via expanded product range of “front-office” Value Adds / dare I use the old industry term “Modules”. This is the first official, public announcement I’ve personally heard of this strategy. It is obvious, but HUGE. It has massive implications for the Xero ecosystem and the future of the small business technology stack! I think this needs an article in and of itself! #WatchThisSpace

Xero describe the current evolution and their mission as “rewiring the small business economy”:

“Moving beyond accounting to building the Small Business Cloud” Andy Lark

The shift from Rackspace to AWS is nearing completion. This platform shift will help drive up margin and open up Xero to leverage additional services (one might assume such as Alexa Voice Service).

Xero are very confident and comfortable with their investor proposition:

  • High Gross Margin
  • Low cost of retention

Add in

  • High Growth
  • SaaS business model (recurring revenue)
  • Large Total Addressable Market (TAM)

Andy Lark (CMO) quoted an addressable market of 15m across their core 4 markets – seems low to me, given the numbers I’ve seen quoted elsewhere for the US – I assume this is of existing “SMB retail accounting software market” sans market expansion.

And their view that:

Small business is the largest opportunity for monetising on the web



As an aside, I laughed when Andy Lark used the world “Thrive” after writing an article having a crack at Telstra for using Thrive in their new marketing campaigns! #Nice

Australia and (probably more so) New Zealand, are leading the world in cloud SMB accounting adoption (by a factor of double). 

Over half of Xero’s new customers are first time users of retail accounting software! #ExcelDominates

On the question of are they keeping an eye on potential disruption from blockchain technologies. Rod stated, that whilst they are very much keeping abreast of Blockchains, they are sceptical on “distributed ledgers” gaining serious traction with essential financial and central government data. He went on to say:

Blockchains seem like a solution looking for a problem



On the question of a NASDAQ listing, the board has stated this will be in play when:

  • turnover above US$100m – tick
  • market conditions favourable for SaaS listings – Atlassian probably makes this a tick
  • Xero is getting traction in the US versus Intuit – this is a WIP

On the question of “when will they pay a dividend”, Rod was very diplomatic by stating:

If you’re looking for a dividend investment, Xero isn’t the company for you. We won’t be paying a dividend in the foreseeable future. We’re a capital growth company.

I had two formal questions at the meeting:

  • Where’s the Gender Diversity? Only one person (senior management and Board) on stage was female. Rod responded that it is recognised and they are actively working on it (internally and at board level with Sam Morgan’s departure), but won’t compromise on quality over diversity.
  • I raised concerns with Andy on a recent price increase coinciding with unprecedented competitive price pressures in Australia. Andy responded with: criticism of the almost “freeium model” being used by some competitors; confidence that the market will see past short-term offers for long-term value assessment (in which he sees Xero winning); confidence that the market is in fact relatively price elastic and price isn’t THE major factor!  

All-in-all its hard not to get swept up in the vision, the confidence and the passion that is outwardly projected by Rod and his team.


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

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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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