How to value a company: XERO (ASX: XRO) Pt. 2

Bryce: [00:00:13] Welcome to another episode of Equity Mates. The podcast follows our journey of investing. Whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you?

Alec: [00:00:29] Oh, I'm very good. Bryce is very excited. We are here for part two of our Value Investor three part series with Owen. We are still in in our away kit. We also are still wearing our party shirts. I'm actually getting kind of jealous of yours, and I'm actually getting kind of curious to taste fair bread again. If you don't want to go on YouTube, that makes no sense. 

Bryce: [00:00:52] Yes. So today we're going to well, firstly, welcome back, Owen Raszkiewicz.

Owen: [00:00:56] Thanks, guys. Appreciate it. 

Bryce: [00:00:58] So Rask, Australia and Equity Mates, if you just joined us have done a value investor program or a course that is available on the Equity Mates and Rask website all about valuing a business. And today we are going to put the theory into practice with a valuation of zero. We recognised that doing a valuation model involves a lot of spreadsheets and we are doing a podcast, so we're going to keep it pretty high level and there is going to be a video accompanying this on YouTube if you want to see what's going on on Owen's screen. 

Alec: [00:01:29] And if you want to get even more in-depth, you can go to the Value Investor program, where Owen walks you through valuations, including of zero. 

Owen: [00:01:38] Yes, yes, zero five companies in the old, very different. So you get a mix of everything. 

Bryce: [00:01:43] Love it. So today we're just going to start with the origin story of Zero. Have a chat about the business model. Take a look at their management team, which is an important concept, chat about financials and then hopefully get to some sort of evaluation at the end. 

Alec: [00:01:57] We'll get a number out of you all. Yeah. 

Owen: [00:01:59] Yeah, I'll give you a number.

Bryce: [00:02:01] So zero. It's an accounting software.

Alec: [00:02:05] And for people who are unfamiliar, it's not the Z row, It's zero zero.

Bryce: [00:02:10] Yeah, the ticker is X-R-O. 

Owen: [00:02:12] Yep. On the ASX. Do you guys use Xero? 

Bryce: [00:02:14] We do.

Owen: [00:02:15] Yeah. So your business uses this tool? Our business uses it. There's actually five businesses outside of the studio in our same office here. They all use zero. And so what is Xero do? Well, it creates software that's used by accountants to manage small businesses. But as you guys know, you probably don't really need an accountant to do 99% of the things because the software takes care of it. And that's what's truly powerful about this software. You just access it through your browser. It costs starting at about 50 to 60 bucks a month, depending where in the world you are, and you just connected to your bank account. And it reads the bank statements, sees where money's going coming from, etc. and presto. So where did it actually start? So it didn't start this simple. It actually started in New Zealand, which is where its head office still is, which is fantastic. I think every great Australian technology business starts in New Zealand and ends up in Australia on the ASX, which is wonderful. So thanks for that. Friends across the pond. 

Alec: [00:03:10] What are you saying about Zipp and Afterpay?

Owen: [00:03:12] Well. Maybe this. Is just a. Bit like the Kiwi Start-Up St definitely punches above its weight, you know, it's a huge way. So must be that fibre optic cable they got. But yeah, it's, it's a, it's an incredible business because it started in around about 2007 and I think it was originally called accounting to point out. But basically the idea was that yeah, well I guess it's the play on the web, right. Could be in 2007. I'm assuming the three of us are just old enough to remember that the Internet, it just transition from you can only read what's on the screen to you. You can actually put stuff in and get things out of a website. And so this is this is basically like the emergence of like cloud computing as we know it, like sending a message across the Internet and getting some sort of reply through a browser. And the businesses that had gone before this, like Salesforce, that was the pioneer of this idea called SAS, which is where you can sell a software product through the Internet on a subscription and zero in particular. Rodri. 

Alec: [00:04:16] So let's let's not let's not discount the true pioneers of that, the good Australian company that didn't come out of New Zealand. Atlassian. 

Owen: [00:04:24] Atlassian, Yeah, absolutely. So and they pioneered not just that, but they also pioneered how to grow an incredibly lean business profitably inside. So yeah, Atlassian unfortunately doesn't trade on the ASX, but it trades in the US under the ticker symbol team, if you want to remember that one. But zero is this, this was this idea that you could access accounting software from anywhere. And the key thing to understand is what happens behind the scene when you traditionally use software like, say, remember Microsoft Office used to come on a disk. Yeah. And you have to buy a new one every year and you have to put in like a code in know what install and blah blah, blah. Well, that's what accounting software was up until only like two or three years ago. Really. So this was 2007. They were like, well, we don't want to do that. We just want to deliver one version via the Internet. And if you. Have a subscription, you get it. If you don't pay your subscription, you don't get it. And they did that. And that was revolutionary because it basically meant that you could access servers and Internet from anywhere. And you don't need a disk, you don't need it. Ten different versions of MYOB. For those who don't know, MYOB was the big gorilla here in Australia. What's interesting is the founder of MYOB was actually one of the earliest investors in Xero and actually took a board seat and wanted to effectively buy the whole company. But Rod Drew, here's the founder of Xero, said, No, no, no, no, no. Look, I want this thing, you know, and it's an incredible business listed on the New Zealand Stock Exchange, then came across to Australia, consolidated the New Zealand into Australia. And Rod Drury stepped back a few years ago and a guy from who has a pretty rich backstory named Steve Vamos from Microsoft and Apple came across and became CEO and we can get to management in a second. But the basic genesis of the business over time, it's made a couple of small acquisitions, but mostly organic growth. It's been unprofitable basically the entire time, and the acquisitions that it has made has not changed the backbone necessarily of the software. What it's done is it's just added important features. So one of the things that I mentioned before was the ability to write a bank statement. They actually bought the company that was doing that for zero and to to bolster that out, to make sure that it wasn't able to, you know, disappear overnight to a competitor or something like that. And then they made a few other things like they've bought Plan Day and a few other businesses that do like h.r. Administration and those types of things. In terms of a business that is bold and has redefined what technology can do from Australia, New Zealand and then in the UK, incredible. Xero is kind of like the poster child for that.

Bryce: [00:06:57] So that's the origin story. And you've mentioned subscriptions there a number of times. So what are at its core, what is the business model for Xero? And you mentioned competitive advantages as well. So how is it building its competitive advantage? 

Owen: [00:07:11] Yeah, so it's it's a very what now that we look at it today, like everything's beautiful in hindsight and so obvious you can actually say if you look in the financial statements that the business is revenue is just growing rapidly like this is the sales like from those subscriptions. And the reason it is doing that is because when you take a subscription, as you guys know, with Xero, you get locked in basically because you don't want to give up the software. So it's super sticky and you can only have a successful subscription business if the thing that you're selling is sticky. Because what happens is instead of taking instead of spending like $1,000 on an extreme example, but imagine you spent $1,000 in Microsoft Office today, right, versus just paying ten bucks a month. Right. You're forgoing a huge upfront cash flow in exchange for a very small fee ongoing. So it takes years for all of those subscribers to stack and layer on top and on top and time and top. And that's the basic business model is get them in the door with a low priced subscription that they'll pay again and again and again and again. And then all of a sudden you go from having 10,000 subscribers, 100,000 to million now 3 million. And that's when you really see that revenue just rocket straight up like that inflection, that exponential growth. And so that's that basic model of zero is trying to get more and more subscribers into the ecosystem with discounting with like sales tactics, like expos, with accountants. I think the best business models, one of the best business models is when the person who pays the bill is not the person who's like facilitating the sale. So what I mean by that is an accountant is the one that sells the software. You don't go in necessarily get it off the shelf, so you get recommended it, but the accountant doesn't pay. You pay. And this is like if you guys are familiar with that person, auto parts here, here in Australia or back court, So on that ASX and you'll see person stores around and this and what it is is it's like automotive parts, but if you think when you go to a mechanic, you don't care where it comes from, you just pay the bill. So for a business like person, when you go and you take your car down, the mechanic, the mechanic recommends, Yeah, we need a crankshaft. I don't even know parts, but let's be honest, you know, brake pads and lots of stuff. They go to person and get it. So you're paying person without realising because the professionals recommended it. So you don't you would never question it. It's the same model with zero, but it's a software for accounting and that's that, that's the model. And the reason people hate the business model, if I could just quickly touch on that is the business is not profitable. So what I mean by that, if you look at the income statement, you go down, you see that line, it says net profit after tax. It's a big negative net. And at the end of the day, the reason that that is negative is because they're investing so much for the growth to get that revenue. Hmm. 

Alec: [00:09:56] So the switching costs are high. I couldn't imagine trying to switch to an MYOB or a QuickBooks or something like that. Now that we've got a couple of years worth of data in Xero and that's what locks us in and that's what makes us where. Price hikes if they come. And that's what makes it easy for them to cross sell, you know, the next bit of software and the next bit of software after that when price has a full team under in that he's trying to schedule and stuff like that makes sense to just do it in zero because we're already there. So that's the competitive advantage. That's the moat. Before we talk about competitors, let's just stay focussed on zero. You said it's not profitable, but it is growing. Give us a sense of the top line growth, the revenue growth. 

Owen: [00:10:40] Yeah, sure. In 2017 revenue was $295 million. By 2022 was 1.1 billion. So it's expanding rapidly. And to your point about, you know, a business that can increase prices, if you think about Netflix, you know, 100 million subscribers. 

Alec: [00:10:57] Turn 20 million. 

Owen: [00:10:58] Yet I was going to add numbers. But if you have around100 million. Subscribers and you charge say again round figures you're charging 15 bucks or whatever. If you increase the price by $1 a month, it's $100 million every month and then you times about 12. You know, you've got a business that just got free money. And so that's exactly what can happen with zero over the last, say, 5 to 10 years. That has not been the game. The game has not been increasing prices. The game has been getting people in the door. And the way that's reflected in the financials is you see this thing called customer acquisition cost or cash for short CIC, and you see that all the time and they're very upfront about how much it costs to acquire someone. And that's it's a very transparent way to illustrate the business model. And and what we will see as the business grows is we'll see that can probably increase because the the harder customers, the ones that are really resistant to change, they are harder to convince and they cost more money to convince. So what will see that probably go up, but what will probably say to your point, rent is the value from each sub subscriber go up because I'll start increasing prices and that's where you get this really interesting dynamic of they won't spend as much on acquiring and they're getting more from the existing subscribers. So the profitability just explodes and that's what we call an inflection point. And that for the most part is zero is jam. That's where it is now. It's still in this process of like, you know, over 3 million subscribers, probably, you know, a few more million that could come onto the platform pretty quickly over the next five years. But then after that, it's or even until then, it's just let's how much can we increase the prices? And you know, even just most recently, the most recent results from zero illustrated how powerful it is. You know, increasing prices just modestly, not just even through the subscription, but they also charge developers to build in their app store, just like Apple does, which we'll profile in a minute. And that's another way where it can just slowly jack up prices. 

Alec: [00:12:56] Yeah, I'll and let's pause there and take a quick break to hear from our sponsors. 

Bryce: [00:13:02] So we're here to understand the valuation of zero. And we've spoken about a couple of key metrics here. Subscriber numbers, prices, you know, Ren spoken about revenue growth. If you can, I guess, clearly sort of take us through the process that you would go through to try and get to a valuation for zero. Knowing that it's not profitable yet. So some of the valuation methods are going to work. How do you and what are the assumptions that you're looking at to create a valuation? 

Owen: [00:13:31] Yeah, sure. So this is the simplest way to model any type of subscription business is the number of subscribers multiplied by how much they pay you gives you revenue. Right. Because it's like customer numbers multiplied by how much they pay gives you the sales. It's pretty straightforward. So then all we need to do is we need to have a sense of how far subscribers can grow, like how big can it get in each market, which they tell us they have an estimate of like 4 million potential customers in Canada, for example. And these are small businesses. And then you go, okay, well, how much can I charge? At the moment? You'll see in Australia there's just about 50 to 60 bucks, but it scales depending on the number of employees. And if you add on to blah, blah, blah, blah. But if you think about that, like what you can see is you can see like different pricing levels over time as well. So you would expect that as businesses grow, they start to pay more. And then even though it's not profitable, we can start to just from those two numbers, we can start to get a sense of the value because we know how much revenue it's how much it's making in sales. And so we could say, you know, price to sales ratio if you want to go down that path because it's still growing, you could say, I don't know the exact number off the top of my head, but size zero is like ten times sales that in the company's worth according to the market price, ten times the annual sales of the business. But you could say, well, I think it's going to grow sales, you know, further. And I think ten times is a reasonable price to pay, then, you know, that's probably going to go up in time. What I do is I take the the number of subscribers multiplied by the price, and then I just feed that straight into my own income statement. So just like you would say in the annual report, I just put this extra step on top of it, if you like, where I'm just trying to predict what might happen in the future. So you've got total subscribers, and I do have it on the video version, but total subscribers. And then I look at, well, how big can I grow in those marketplaces like Canada, UK, Australia? And then I basically just get to that revenue line and I make some assumptions about the profit margins. Then from there you just do a profit margin and you get down to cash flow. 

Alec: [00:15:34] So we're not going to talk through the details of the spreadsheet because that probably doesn't translate over audio. But let's just ask some questions to unpack sort of how you think this business goes into the future, because as we spoke about on the last episode, the real where the rubber hits the road where the best value was a separated from the average value is isn't in their ability to build a spreadsheet. It's in their ability to accurately assess a business's prospects. So first question when do zero become profitable?

Owen: [00:16:06] I'd say in the next two years. Okay. Yeah. So we're recording, We're recording this let 2023. But it is in 2023, I would say before 2025 it will be profitable. Okay. And you can actually find it interesting again. So this is why I initially bought this a long time ago, Justice shares in this company. And my assumption at the time was this if Xero wanted to, it could cut its marketing budget in half and be instantly profitable. And that was something that you don't need necessarily to model. You can just plug to spend a lot of money on marketing.

Alec: [00:16:37] Yeah, you can look at that in the current income statement. 

Owen: [00:16:39] Yeah, exactly. And you can be like, do they need all that? No, But do you want them to do it? Yes. Because then that means if that's getting growth for the future, more subscribers, you would want them to spend. 

Bryce: [00:16:49] And so what's the assumptions in that next two years that lead to it becoming profitable? 

Owen: [00:16:55] The key metric. So remember how I said before you get the number of subscribers multiplied by how much they pay? So I am baking in a bit of expansion in the average revenue per user. So the average subscriber basically what they pay. And so for me, that's looking like I've got it up to around about $35. If you look at just a core user per user. 

Bryce: [00:17:16] Yeah. 

Owen: [00:17:17] So the thing is they don't collect all of it. 

Bryce: [00:17:20] We're paying like seven, I think. 

Owen: [00:17:21] Yeah. So they don't collect all of it. So what can happen is the accountants can take a clip as it goes through and this is a blended rate. 

Alec: [00:17:29] Is our accountant taking a clip? 

Bryce: [00:17:31] Hell, no. 

Owen: [00:17:32] It's not. It's not much. It's not. It's not telling me that I'm not doing your dirty work. But if you think about it, like, do you guys use Xero to pay super as well? Yep. Yep. So we do that as well. You can also have plug ins and little add ons is like one or $2 per employee and that sort of stuff. And so more and more, like you guys said, you've kind of like put your flag in the ground. I'm in. I'm in Xero, not MYOB, not Intuit, whatever you're going to eventually probably use that stuff because it will be easier. And so for. Me. And there's this one really nerdy thing I want to make clear is when Xero publishes its number for what it earns per user average revenue per user, that's based on the last month. Right. So if you look at this financial statement at the end of the year and there's that number in there that won't match up with your income statement because they're taking the last month and saying our average revenue per user is this, But that doesn't show you what happened nine months ago, for example. 

Alec: [00:18:31] All right. Let's rip through a few of the key assumptions, because I think that's the point that we want to get to. It's that the process of forecasting the future is a process of building assumptions. And the best modellers are right about more of their assumptions and they're wrong. So what's its revenue looking like in 2025? 

Owen: [00:18:48] In 2025 you're looking at about and I'll just quickly jump to my spreadsheet. You're looking about 1.7 1.8 billion. 

Alec: [00:18:54] Okay. So 1.2 today, did you say. Yeah. Yeah. So not unreasonable assumptions you would say there. How far out do you model this. 

Owen: [00:19:03] I would go to well the current model I've got 2032. Oh wow. Yeah. There's a ten year model and 2 minutes. Tell you why we're quick. Yeah. So when you model a hypergrowth company, you cannot use a 3 to 5 year model, because what happens is when you get to the end of the five year, you just it's like a cliff and it just goes into like infinity. So you have to model it through the hypergrowth because if you don't, you're going to miss out on the ability to have that insight over the 5 to 10 year window. And that's where you see a lot of this price inflection. 

Bryce: [00:19:32] So what does 32 look like? 

Owen: [00:19:34] Well, 32, it's pushing $3 billion. Now, this is my. 

Alec: [00:19:38] $3 billion in revenue. 

Owen: [00:19:39] This is my base case. I want to be clear about this. This is not like a super outlandish thing. I don't think I've actually modelled the company to be approximately the share price today. Why did I do that? Well, it doesn't. It's not me trying to guess. It's me trying to say. What does the market think? Yeah. 

Alec: [00:19:57] Yeah. So to be clear that you've built your assumption and that gets to your number of what the share price should be based on your ten year model. And we'll ask you what that share price should be, but we'll put it in that. And then you've also done a separate model, which is not building on your assumptions, but taking the share price as it is and then putting what the market is assuming to get to that share price. 

Owen: [00:20:20] Yeah. And that can still be wrong. Like there's no. 

Alec: [00:20:24] Market is often. 

Owen: [00:20:24] It can be often wrong. Right. 

Alec: [00:20:26] Now let's let's so 2032 you're at $3 billion in revenue. What's your average revenue per user.

Owen: [00:20:32] I've still got it around. It's actually at $36 so it's not that much higher now. This is what I'm saying. Like, if you think about that, there's a lot of scope.

Alec: [00:20:40] Yeah. So you said it's got about 3 million users today. How many users does it have in 2032?

Owen: [00:20:47] It will have approximately seven mil.

Alec: [00:20:50] Okay. So so it's a bit more than doubled in size in the next ten years. And then finally, how profitable is it in 2030 to the size? 

Bryce: [00:20:58] It's not.

Owen: [00:21:01] So let me just scoot down here. So we're looking closer to $1,000,000,000 in profit. 

Alec: [00:21:06] Okay. So it's kind of like a 30, 30 project. 

Owen: [00:21:09] Yeah. Yeah. So that's pretty aggressive. But in terms of the profitability. But what I've done is I've basically taken, like I said, that marketing and I actually think marketing will fall. And that's probably the key risk in the modelling. I actually think marketing will fall now that if you if you take that in a lot of competition, maybe that doesn't happen. So this is again the art form with the science, but that's where you get the inflection point. 

Alec: [00:21:33] So just from a taking the theory of a discounted cash flow and applying it to what you've got today, you've got profitable in 2025 and then you've got it's growing its profit from, I assume, pretty minuscule in 2025 to $1000000000 in 2032. And so the task for you as the value is to say its profits stream in those seven years might total a couple of billion dollars all up if you add those seven years together. But I want to know what I'm paying for that future profit today. And so that's why you do a discounted cash flow, because the value of a dollar today is worth more than a value of the dollar tomorrow. And the value of a dollar in 2025 is worth more than the value of a dollar in 2032. And the discounted cash flow is just the method to actually calculate what the value of each of those dollars are and what you should be willing to pay for them today relative to the rate of return that you want to get. Yeah. 

Owen: [00:22:32] And this is you actually introducing a real key thing that happens in most models where they go wrong, which is this idea of like the future value is how do we get that back to today? Right. And this is what we call the discount rate. So the discount rate, there's some fancy maths around it. It's really kind of pointless. So because you can think of the discount rate as my expected return. Right. So what, what return do I require from an investment in order to make the investment. So if I think zero is really risky, well, I wouldn't have a higher discount rate because I'm like, I'm taking more risk, so give me more of an expected return. And so for this model in just this video, I've actually that really simple that just 10% so I expect 10%. Now there are many different schools of thought on this, which we don't have time to go into. But for me, I think zero is one of the highest quality businesses in Australia. So I just think the quality of the business, its products services is really up there. And so in theory, if you think something's like a really good business, doesn't that mean that it's lower risk? Right? But if you punch that into a model, your upside is huge. So I tend to be conservative in that approach and just say, what do I need to basically justify an investment at today's prices? And then all that other stuff is like, yeah, that's just make it right like that. That's great. That's upside that I'm basically not assuming. But there are plenty of risks and there are plenty of ways that this can go wrong.

Bryce: [00:23:59] So before we close out and get to the price, a lot of the assumptions that you've put in around user growth, growth of sort of price per user revenue per user cost. 

Alec: [00:24:09] Base. 

Bryce: [00:24:09] Cost base marketing, yeah, they're all assumptions that you've sort of come up with. But what's the flipside? Like what could go wrong here and what are the risks that you consider with them with those key assumptions? 

Owen: [00:24:22] Yeah, these things can change really quickly. And the big one is I'm making assumptions that are probably not what will actually happen. And so what I mean by that is, you know, I said, like I expect marketing to fall. That's my belief that it should. It should because it will get more profitable if it does that. But the management team at the time could be like, now we're going to try this other crazy idea. And so management is always a massive uncertainty when you're modelling so far out. And in the last year, Xero has got substantially, I would say, riskier when you look forward because we've seen some changes. I said. Steve Vamos announced he's stepping down in late 2022. He'll be stepping down in 2023. He's been replaced by a CEO that has a lot of experience in the US. Now they've also got a chair who oversees the CEO role and the executive team and the board of directors and the chairs. David Thodey. At the time of recording he has experience with Telstra, you may remember, and also tyro payments. And what I do is I study all of those people want to go back and look at how they performed in the past. And my, my, my I guess my just broad strokes, my view is that they tend to be quite aggressive in spending. That would be might like from just looking roughly at their track record. And so if you think about that, that's not necessarily the best way to make a profitable business. It might grow at the revenue line, but does it grow at the cash flow? Maybe not. So that's a big risk. And the other thing which we haven't really touched on is just competition. So much competition coming and things can change rapidly in technology, particularly in financial technology. And then finally in the UK and Canada, the assumption is rapid growth because those governments are making tax digital. So that means that they are forcing companies to report their taxes digitally, but that could be further down the road if things get too hot. 

Alec: [00:26:11] Yeah. Now I want to hit on competition because I think that's probably the best illustration of where the assumptions in your model can really change based on what plays out in reality. So the assumption in your model was in 2032 there will be 7 million users unless Australia has massive population growth or Australia and New Zealand businesses just boom and we pump out like for more atlassian's they're going to need to crack overseas and they're looking at America. They've got an American CEO, but it's not like there aren't options in America. Intuit have QuickBooks, that's FreshBooks. There's a number of other strong competitors that have very similar business models. So how do you I guess first first part of the question is how did you get to the seven? The second part of the question is how do you constantly stress test that assumption as more and more information is coming out? 

Owen: [00:27:04] Well, it's it's actually it's a great, great point. Right? So when we first created this model quite a few years ago, the best source for us was the national government databases. So in Australia we know the ABS, Australian Bureau of Statistics has business numbers. In the US there's like the I think it's called the the what's called the Bureau for Business or something like this, Federal Bureau for business. And you can get the data from then they publish it every month. Same in the UK, so you can get that and you can also see what competitors are saying to sort of sense check it to zero. That wouldn't serve Atlassian very well. The only thing that the Atlassian business would probably break if they tried to use Xero because it's typically for businesses up to 1 to 200 employees, you don't really then you go to something more.

Alec: [00:27:46] Or forget four more or less into 400 more Equity Mates. But yeah, yeah, yeah, yeah. 

Owen: [00:27:50] So that's pretty well like it. And so most of the growth from the business will come outside New Zealand. Definitely. That's already maturing. They dominate that market end to end here in Australia. They basically jump. At the market. The latest data shows that there's now around 900,000 subscribers in the U.K. and now in North America. This is pocket of North America. People think that that's the U.S. because that's where they were trying and they still are. As far as I know. But the big one there is Canada, where the tax system is much more like Australia, whereas in the U.S. you have like each state has different tax rules, which is super complicated. In my opinion, that is completely dominated by Intuit, which is their own QuickBooks. But outside of that, Canada is a frontier where they can potentially win with the right management. And you've got to think like even in North America, they have 354,000 subscribers. So this would be like Xero only a few years ago in Australia. Right. So this is not a small business in the U.S. It's more competitive for sure. But it's another one. And you look at smaller geographies, maybe like Singapore or South Africa, that's where they bucket is rest of world. And I don't really think about that in the modelling. Like it's just like it's basically whatever comes, whatever comes. But U.K. definitely this is, you know, I believe that it will be it will be Xero, Intuit. And then third spot way down is Sage in Canada. It'll probably be Intuit, Xero and then the others that probably mix. 

Bryce: [00:29:20] Love it will own to close. I guess the big question is what's the, what's, what's the value? What are you looking at in today's numbers?

Owen: [00:29:28] Well, at the time of recording, I do a range, so I never like I want to be specific because people don't like it and they're like, what's $2 undervalued? And it's make a lot of decisions around that. So my valuation is between 70 and $85, and that's down from where it was a few months ago. Because of that, the change at the management level and some of the expenses growth. So that could change again. But between 70 and $85, be careful if you're modelling it, it's that's my Australian dollar number. Yeah. It reports in New Zealand. Yeah.

Alec: [00:29:55] And for context, time of recording was basically the low end of that range. 

Owen: [00:29:59] Yeah, yeah, yeah. So it's probably in the money but it's a high quality business, not advice. 

Alec: [00:30:04] Do your own research, do your own modelling.

Bryce: [00:30:06] Yes. Do your own education as well. The value investor program with all of the information, the steps, the checklists, the theory behind everything that Owen has spoken about today is in the Value Investor program. It's available on equitymates.com under our resources section. It's also available on the RASK website. It's value for money, that is for sure. And if you are interested in building your own models and understanding the ins and outs of valuation, getting under the hood of companies, then certainly recommend getting around but we'll leave it there. Next episode we are going to be unpacking the largest company in the world and that is Apple. And we'll pick it up next week.

Alec: [00:30:42] Largest publicly listed. 

Owen: [00:30:43] Largest publicly listed. Sounds good. Check it out. Next time. Thanks, guys.