Xero share price jumps
Customer count swells as first profit nears
Xero shares climbed as the cl oud- based accounting software firm moves closer to its first ever profit as customer numbers continue to swell, and its 2017 full- year net loss narrowed as revenue grew.
The Wellington-based company said operating revenue was $295.4 million in the 12 months ended March 31, up 43 per cent on the year earlier, or up 51 per cent in constant currency terms. Its net loss was $69.1m, 16 per cent narrower than the $82.5m reported in the prior period. The company’s shares closed up 5.3 per cent yesterday at $23.
Xero’s loss on an earnings before interest, tax, depreciation and amortisation basis narrowed to $28.6m from $59.9m. In the second half of the year, its ebitda, excluding share-based payments, turned positive at $1.6m versus a loss of $17.4m in the period a year earlier.
The company said it now has 1,035,000 subscribers, after adding 318,000 over the past year.
Chief executive Rod Drury declined to say when he expected Xero to post a profit.
“I am very careful not to put dates on that sort of stuff,” Drury said.
Given the company was ebitdapositive in the second half of the year, excluding share-based payments, and the operating cash flow also moved into positive territory “you can see where we are making progress on all those things”, he said.
Market expectations, however, are for Xero to achieve a profit in the 2019 financial year.
“In the last two years we have added half a million customers,” Drury said.
Five years ago Xero had about 50,000 customers and “we knew we had to make that massive investment in infrastructure because we knew we had to on-board that many customers”, he said.
“We have been really focused on making sure we can do what we need to do with the resources we have. That’s driving great margin and getting us toward break-even,” he added.
Drury said he did not expect that expansion to slow down, with more potential in New Zealand, Australia, the US and the UK in particular.
The company did not give specific earnings guidance other than to say operating metrics were expected to improve in the 2018 financial year. It also noted that cash usage in 2018 (based on foreign exchange rates at April 1, 2017) is forecast to reduce from the 2017 financial year. In the current financial year operating cash outflow reduced to $4.4m from $34.8m in the prior year. —