I'll admit, the huge IPO debut of Aussie tech company Atlassian Corp last week left me a tad disappointed.
Not because I expected more; the share price jumped a huge 31% in its first trading day, but selfishly, because there was no prior ASX listing to take advantage of!
Fortunately for us, two big tech names which have elected to list on the ASX are online marketplace Freelancer Ltd (ASX: FLN) and cloud accounting firm XERO FPO NZ (ASX: XRO).
All eyes on Xero
Of the two companies Xero appears the most likely to be the next 'Atlassian Corp.' Xero has always harboured the goal of a U.S. listing which would both increase its brand exposure in the pivotal U.S. growth market and likely raise additional capital to continue growing customers over large competitor Intuit.
Earlier this year Xero pushed back its timeline for listing in the U.S. to at least 2016, in part to allow time for the company's freshly established U.S. management team to settle in.
How does Xero compare?
Xero is not wildly dissimilar from Atlassian Corp in the tech stakes. Both companies have clear growth agendas and a focus on recurring subscription revenue.
Atlassian Corp reported total revenue of US$319 million to 30 June 2015, while Xero is forecasting to hit NZ$200 million in subscription revenue for the financial year to 31 March, 2016.
Here is a quick comparison on the two companies:
| Atlassian Corp. (US$) | Xero (AU$) | |
| Shares on issue | 155,803,022 | 127,323,000 |
| Aprox market cap | $4.13 billion | $2.1 billion |
| Total revenue 2015 | $319.5 million | $118.9 million |
| Total revenue growth 2015 | 48% | 78% |
| Revenue per share 2015 | 2.1 | 1.0 |
| Gross profit margin 2015 | 83% | 71% |
Source: Xero 2015 Annual report. Atlassian Corp. 2015 prospectus.
One key difference is that Atlassian currently turns a profit, albeit a small one, while Xero continues to gobble up cash reserves. This is a point Xero is regularly criticised on, but it is a deliberate strategic move to accelerate long-term subscription revenue.
Comparing revenue per share makes Xero look expensive relative to Atlassian Corp, but Xero achieved a much faster rate of revenue growth in the 2015 financial year.
The next Atlassian Corp?
Given the current insatiable appetite for shares in successful tech companies in the U.S., if Xero can continue on its growth plan and boost the number of U.S. subscribers, it's easy to imagine strong demand for shares when the time comes to list.
