By Jenny Ruth
May 16 (BusinessDesk) - Accounting software company Xero widened its annual loss while growing operating revenue 36
percent and subscriber numbers by 31 percent.
Xero reported a $27.1 million net loss for the 12 months ended March, up from the previous year’s $24.9 million loss,
but said it made a profit of $1.4 million in the second half.
It also had positive free cash inflow for the first time of $6.45 million, 1.2 percent of revenue, in the year compared
with a $28.5 million outflow the previous year.
“A number of financial metrics point to Xero’s improving profitability and increasing cash generation in full-year
2019,” the company says in a statement.
“Gross margin percentage improved in FY19 by 2.1 percentage points to 83.6 percent, contributing to a 4.4 percentage
point increase in ebitda (earnings before interest, tax, depreciation and amortisation) – excluding impairments – to
16.6 percent due to improving efficiencies in sales, marketing and product design and development costs,” the company
says.
The net loss for the year is primarily due to impairments taken in the first half.
Ebitda excluding impairments rose 84 percent to $91.8 million in the year.
Average revenue per user rose to $29.25 a month from $29.13 and lifetime value per subscriber rose 3 percent to $2,398.
Subscriber numbers rose to 1.82 million from 1.39 million the previous year. Subscriber numbers in Australia and New
Zealand passed a million and were up 22 percent, British subscribers rose 48 percent to 151,000, and North American
subscribers rose 48 percent to 195,000 – excluding Hubdoc, the increase was 44,000, or 33 percent.
Xero is challenging the US incumbent Intuit which is due to report its third quarter results next week. Intuit had
nearly 3.9 million subscribers to its online QuickBooks product at Jan. 31, of which 2.9 million are in the US.
Xero raised US$300 million from convertible notes in October last year, “demonstrating investor confidence in the
business. Funds raised provide the flexibility to execute acquisitions and investments that will enhance and extend
Xero’s small business platform and ecosystem,” it says.
The company had $121.5 million in cash at March 31, up from $21 million a year earlier.
During the year just gone, it bought Hubdoc, a data capture solution, and Instafile, a British tax filing and compliance
tool.
“We’ve delivered a strong result with a number of major milestones for Xero, including our first positive free cash flow
result and the UK adding more than 100,000 new subscribers within a six-month period,” says chief executive Steve Vamos.
“Another important milestone was the positive bottom line result delivered in the second half, which demonstrates our
improving profitability,” Vamos says.
“As we head into FY20 and beyond, we’re making great progress towards our strategic priority of driving cloud accounting
adoption globally. We have a genuine competitive edge by prioritising investment in growth and partnering closely with
accountants and bookkeepers to deliver a human-centred technology experience for small business communities across the
world.”
The company says it expects free cash flow in the current financial year will be similar as a proportion of revenue as
in the year just gone.
Xero shares, which now trade only on ASX although it remains headquartered in New Zealand, closed yesterday at A$54.31,
down from their record A$55.98 reached earlier this month and up more than 35 percent on a year ago.
(BusinessDesk)