NextDC is the biggest data centre stock on the ASX and the second biggest company in the entire Oceania region after Equinix. It has had an unparalleled record of success in the last decade, growing its market cap from $80m to over $6bn!

It was founded in 2010 and expanded on (correct) anticipation that more data centres would be needed, above and beyond what consumer telcos could provide. Although they cost a lot of upfront capex, they can generate revenue very fast once complete.

Fast forward to today and NEXTDC made $404.3m and $204.3m EBITDA, all from 17 data centres. Impressive considering it didn’t even have one data centre operational at its IPO.

Xero offers software that helps SMEs do business. It has over 3 million subscribers, and primarily sells accounting software that helps businesses keep books, pay bills and send invoices. But it has gradually developed features useful beyond book-keeping, such as storing files, converting currencies, keeping track of inventories and creating professional quotes.

Xero is all about helping small & medium sized businesses do business. The company, which has over 3 million subscribers, primarily sells accounting software that helps businesses keep books, pay bills and send invoices. But it has gradually developed features useful beyond book-keeping, such as storing files, converting currencies, keeping track of inventories and creating professional quotes.

Clearly, Xero is an essential service to its customers….it’s very hard to switch it off just to save a few bucks. And what incentive is there to switch to another solution like an MYOB? Very little. Whatever few bucks would be saved, would be lost in the long-run. Xero’s tools are estimated to save its customers on average 5.5 hours of manual work per week. We guess that is why its churn was only 0.9% in FY24, even amidst inflation.

As if that wasn't good enough, the company continues to innovate over time, is growing faster outside Australia and New Zealand than outside, and still has some room for growth. The company believes the TAM (Total Addressable Market) is NZ$100bn and that is just the top 3 jobs its software is used for – Accounting, Payroll and Payments. Adjacent Tasks, including other tasks such as inventory, CRM and project management, could be another $39bn. The company has the explicit goal of doubling revenues in the next few years.

In FY24 – the 12 months to March 31, 2024 – the company recorded:

• NZ$1.7bn in revenue (up 22%),
• 4.16m subscribers (up 11% and 419,000 from 12 months prior),
• $39.29 in average revenue per user (up 14%)
• An 88% gross margin
• A $174.6m profit (compared to a $113m loss in the year before).

ReadyTech is a provider of SaaS technologies in Australia to the education, government and corporate sectors. Its offerings include (but are not limited to) asset management, property, licensing and compliance, finance, HR and payroll, and customer management products.

In FY24, the 12 months to June 30 2024, ReadyTech recorded $113.8m in revenue (up 10%), EBITDA was $38.8m (up 11% and representing a 34% margin), while the company's profit post-acquisition was $16m (up 6%). The company boasted a highly sticky customer base that is willing to pay a premium for its services.

For FY25, ReadyTech has advised shareholders to expect a 34-35% EBITDA margin. It has a pipeline of $170m in revenue by FY27.