New Zealand based but ASX-listed accounting software group, Xero continues to run up losses as it builds more sales and subscribers.
The cloud software firm, which is headquartered in Wellington and only listed on the Australian stock exchange, yesterday reported a loss of $NZ29 million for the six months to the end of September.
That was up 46% on its loss during the same period last year but the company said subscriber numbers rose by 193,000 to almost 1.6 million, taking into account the effect of its acquisition of Canadian company Hubdoc in August.
Without the Hubdoc buy acquisition, subscriber numbers were still up by 174,000 – which was more than the 164,000 subscribers Xero added during the September half year last year.
The company said its Annualised Monthly Recurring Revenue (AMRR) rose 40% to $NZ589.1 million in the half.
Rather than focus on the increased loss, invested looked at the rise in continuing revenues and higher subs numbers and moved the shares up 1.8% to $A43.75.
Xero CEO, Steve Vamos, described the result as “strong” and said the US$300 million (NZ$450m) Xero raised in October through the issue of convertible notes would give it the “flexibility” to make more acquisitions and investments. He said the UK had been a highlight for Xero with revenues for the half-year there up 46%.
Vamos would not forecast when Xero would finally break into profit but said it was “on that track”.
“The highlight number is the annualized monthly recurring revenue number – $589m, up 40 percent.”
That reflected Xero earning more from its subscribers as well as growing its customer base, he said.
The higher loss reflected the write-down of the investment Xero had made in US payroll software, which had been a good business decision, he said.
“We have shifted from building something that only served 30 percent market to partnering with a company that serves a much larger part of the market.”
“Our acquisition of Hubdoc delivered a key element in Xero’s code-free accounting strategy, enabling small businesses and their advisors to focus less on paperwork and more on growing their business. Likewise, Xero’s strategic alliance with leading US payroll provider Gusto is an important step in the implementation of our US strategy.”
“Xero is very well positioned to take advantage of organic growth opportunities and following the completion in October of our US$300 million convertible notes issue, we have the financial flexibility to target complementary acquisitions and investments.”
The company said that “Excluding capital outlays for M&A, Xero is managing the business to cash flow break-even within its current cash balance, without drawing on its debt facility or the net proceeds from convertible notes issued in October 2018. Following cash flow break-even, it is intended that surplus cash flow will be reinvested, subject to investment criteria, to drive long-term shareholder value. “
