The thing that concerns me is that XERO is burning cash at an ACCELERATING rate, (on track for $88m this year) and will use most of its existing cash within two years. What then - another equity raising and more dilution.
Management needs to talk about how its going to reduce costs to eliminate cash burn whilst still growing the customer base. I worry they will simply never be profitable and they haven't outlined a strategy on how they are going to do that except to say 'wait when we get big enough economies of scale will fix it' or we will cut our customer acquisition costs.
What I don't see is a well worked plan for transitioning from a cash burning company focused on growing the customer base to a company which needs to spend significantly less on this and product development because of the spin off from size. It just looks like grow and hope to become the dominant player and all will be well.
XRO Price at posting:
$12.95 Sentiment: None Disclosure: Not Held
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