@Jimmy thanks for the "heads-up" as I would otherwise have missed this. I haven't fully digested the webinar, but overall the impression was positive.
Some headline takeaways or impressions.
- The AI demonstration shows that $XRO have been investing heavily into this capability. I think the demo and the discussion around it provides a good example of the themes we have been discussing in our "Future of SaaS SW Companies" forum here. The customer experience looks pretty seamless to be, with agents working in the background, and JAX able to act as the "Agentic AI Manager". I can really see how both business owners and their accountants can use this to be more productive.
- I was impressed be the Melio team, and I got the impression that there is a good cultural fit between this founder-led enterprise and $XRO focus on being on the offensive in tech innovation in its industry. It helps that one of the Melio founders is the $XRO US CEO - given the massive market opportunity ahead of them.
- Businesses, Governments and Banks in the US still write $8 trillion of paper cheques for commercial activity a year --- wow!
- With the statement that Melio will be EBITDA positive by end Q2 FY28 on a runrate basis, one of the analysts set out what sounds like a pretty clear bridge from FY25 to FY28, and the CFO seemed reasonably OK with this. (So, I'll need to have a look at this to update my model.)
- Good to see Melio-Xero product integration live in the US from Jan-26 .... from the demo it looks pretty seamless to me.
- On AI, I loved some of the analytic capabilities shown, including the predictive analytics that leverage both customer data and the broader, huge $XRO dataset
- Melio seems to be powering ahead ... good ... CEO seems pretty fired up with the Fiserve-Melio tie-up and the opporunity in the banking sector. Sounds like this could end up be pretty material on its own, although there are competing offerings, so no doubt it will be competitive.
- Important to look at US progression for $XRO in terms of Gross Profit Dollars-added and not % margins, as payment values at low margins likely to scale much faster than new SaaS subs.
So, what is not proven yet is whether $XRO+Melio are better together. Does the combination help accelerate $XRO's ability to attract the marginal new customer in the US. It will take a year or two for that to become clear. The team however, seem pretty confident that it will. We'll see.
On a positive, the integration appears to be progressing well, both at a technical integration level, and at a leadership level.
The Melio CEO made a telling remark that, when the acquisition was agreed he thought the pace of innovation might slow down being part of a bigger corporate. He says, that hasn't happened and, on the contrary that $XRO is fast and aggressive. Good.
All of the analysts on the call are pretty confident about $XRO's prespects based on their current price targets, relative to the market price (!!!)
So, it will be interesting to see what the analyst note report coming out of today's meeting. I make this comment in the context that across the anayst community, views on Melio EBITDA breakeven appear to vary from FY28 out as far as FY32 (Jeffries)! Prior to today, as far as I can tell, $XRO did not give a quantitative statement on when Melio get to be operating cashflow breakeven. So the H2FY28 target is new information, and it is at the positive end of the market's view, so far as I can tell.
However given the MASSIVE gap between TP and SP, I can't imagine anyone will actually raise their price targets? Let's see.
Disc: Held (RL, 6.5%)