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MYOB narrows loss, lowers debt mountain, claims cloud momentum

Xero's key regional rival says it has improved its earnings and debt position and is winning customers and moving more clients to the cloud — but it remains shy of specifics for its online and customer claims.

MYOB has today reported a 2013 full-year net loss of $A14.1 million. In 2012, the accounting software company lost $14.8 million (the company's financial year coincides with the calendar year).

Revenue increased 13% to $A246.6 million.

Ebitda improved 14% to $A120.9 million.

Total debt and liabilities as of December 2013 were $A725 million, an increase on the $A666 million in December 2012, but an improvement on the $A793 million reported in June 2013.

Within that total, senior debt rose from the year-ago $A408 million to $A475 million; MYOB's subordinated notes, listed on the ASX, remain on the books at $A155 million, and other liabilities have decreased from $A103 million to $A93 million.

Total equity, listed as $A556 million in December 2012, was reported as $A608 million.

On a conference call, CFO Richard Moore said MYOB's ebitda had got a shot in the arm from its $NZ136 million, May 2013 acquisition of Auckland-based bankfeed provider BankLink (a cofounder tells NBR that BankLink's turnover in its final year before being bought was between $40 million and $50 million. MYOB doesn't break out Banklink's specific ebitda or revenue contribution).

An increase in cashflow had improved MYOB's position against its debt covenants, Mr Moore said. MYOB now has 30% headroom on its senior debt covenants and 27% on its notes.

1.2 million 'active' customers
CEO Tim Reed put the total number of "active" MYOB customers at 1.2 million (a figure the company has been using since 2012). Most are concentrated in its core markets of Australia and New Zealand.

Mr Reed told NBR there was a distinction between active and paying customers, given not all customers are on monthly or annual subscription plans (MYOB's ASX debt listing requires only partial disclosure).

The CEO won't break out the number of paying customers, those in Australia vs NZ, or the number online versus offline.

However, he reeled off a number of stats that show the company's move to the cloud is gaining momentum.

Sixty percent of new customers are now choosing cloud versions of MYOB's products, Mr Reed said, adding "we've crossed the chasm."

Mr Moore stressed that 92% of the company's income is now recurring revenue. Customers on annual or monthly subscription plans yieled "significantly higher revenue" over their lifetime.

The company is spending more on R&D, and boosted headcount by 150 over the year - 100 from the BankLink acquisition and another 50 from a recent recruitment drive which has included software developers, sales and sales support staff. MYOB now has 750 employees in Australia plus 290 in New Zealand for a total of 1040 staff (Xero has 600 across NZ, the UK and US; it says it will double numbers over the next 12 to 24 months but will likely not be adding any sales positions across the Tasman).

Mr Reed reiterated that MYOB is launching several new products and upgrades over the coming months, including a cloud product aimed at accounting professionals, and Pay Direct, an app and dongle that will turn a smartphone into a terminal that can accept eftpos and credit card payments.

In midday trading, after the full-year result was made public, MYOB's subordinated notes [ASX:MYBG] were up 0.52% to $A97.50. The debt was listed in December 2012 at $A100.

Xero: 100,000 paying customers in Oz
Approached for comment about MYOB's result, Xero global strategy head Chris Teeling said, "I think I will let the numbers say it all."

Earlier this month, Xero said it had hit the 250,000 customer mark but did not break down that total by geography.

Yesterday, Mr Teeling told NBR the company now had 100,000 paying subscribers in Australia, a figure the company went public with last night. 

In October 2013, Xero reported 79,100 paying customers on MYOB's home turf.


Woodward Partners Securities:  Reduce; 12-month target: $27.00 
Forsyth Barr: Underperform; 12-month target: $24.75
First NZ Capital: Outperform; 12-month target: $45.70
(Xero [NZX: XRO] was at $40.25 in early afternoon trading)

XERO HALF-YEAR RESULT (reported Oct 3, 2013)

Loss: 17.1 million
Revenue: $30.3 million
Cash: $230 million
Customers: 250,000 as of February 2014. No geographic breakdown given. (In October 2013, with customers at 211,300, Xero gave the following geographic breakdown - NZ: 85,500; Australia :79,100; UK 30,100; US/rest-of-world: 16,600)
Xero says it expects FY2014 full-year revenue of up to $80 million. See also NBR's report on Xero's Jan 31 NZX update: Xero customer receipts rise 14% in 4Q as cash burn creeps higher

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