This coming Thursday the 12th of May will see Xero release its Full Year results for 2015/16. As a shareholder and eager amateur commentator, I’m quite keen to see what they have to say.
Those of you that have read some of my previous articles (like 7 Xero Xero k and Xero+Q3=?), will know that I have raised concerns regarding Xero’s growth trajectory since the release of their Q3 cash flow report.
Xero announced 400,000 subscribers 11/12/2014.
174 days later, on 3/6/2015, they announced 500,000 subscribers.
119 days after that, as at 30/09/2015, Xero announced 593,000 subscribers in their half year results.
Assessment of listed (International) AuNZ SMB Accounting Tech
In Part I of Getting SaaSy, I assessed the ASX and NZSE listed SMB accounting tech players competing in the Australian and New Zealand market. For purposes of comparison and relevance, in this installment I’ve assessed the two major international players Intuit and Sage, plus, by popular demand I’ve had a look at Netsuite, whilst not really targeting AuNZ SMBs, they are the longest standing accounting tech SaaS cloud player in the world.
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).
Understanding where Accounting Tech has been, to foresee the future
At the recent MYOB Incite, apart from playing semantics around “Disruption vs Transformation”, CEO Tim Reed espoused the line: “Today Defines Tomorrow”. I’d go a step further: I am a firm believer in understanding the past to navigate the future. In this article, I’m going to review from whence we came, so that I can shine a light on where I believe the accounting tech industry is at, and where we are heading.
And why the likes of Intuit, Sage, Xero and MYOB are investing so much to make it happen
A couple of recent interactions have led me to believe that the broader market doesn’t fully appreciate the potential for the accounting technology industry. My intention over a series of articles, is to highlight my view of where the industry is headed and why I and many others are so excited to be part of what is unfolding.
I’ve been analysing the recent “Apendix 4C Quarterly Cash Flow Report” from Xero. No matter how I slice and dice the reported revenue number, compared with the last couple of years, this recent number just doesn’t fit.
- Q3 (NZ Fin. Year, October-December) revenue was announced at $52.607m
- That’s $4.416m (9%) up on Q2
In October, after a sudden rise in its share price (from hovering around $1.90 to highs of around $2.50) and rumours of a trade sale doing the rounds, Reckon confirmed it had engaged Macquarie Capital to help it “consider its strategic options“.
As rumours have continued to circulate on deals being done with both MYOB and Sage, the share price has stayed around $2.40.
If I were a betting man, and I am, I would be betting an announcement by Reckon is looming.
As part of the relisting of MYOB on the ASX, Bain Capital retained 57.7% majority shareholding with the following clause:
If the share price doesn’t increase by 20% in Mar 2016 (20 day Volume Weighted Average Price after the FY15 results are announced), Bain can’t sell down until Sept 2016 (after the announcement of the 1H16 results). At that point they can sell down completely if they choose.
Pricing Power Podcast 72
Recently I joined Steve Major on his Pricing Power Podcast to discuss my thoughts on Value Adding with Technology.
Steve and I could have spoken for hours, as we talked through our congruent views on the accounting industry and the role technology has to play in transforming the value being delivered.