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Xero hits $100m in annualised revenue

Xero [NZX: XRO], the cloud-based accounting software firm, continued to boost sales last month, with annualised revenue of $100 million for the first time.

Annualised revenue, which Xero recognises on a customer subscription basis, reached $100 million in May, with monthly recurring subscription revenue of $8.6 million, the Wellington-based company said in a statement. That's up from annual revenue of $93 million in March. Xero reported operating revenue of $70.1 million in the 12 months ended March 31.

The company is chasing sales growth in lieu of profit, raising $180 million from investors last year to help fund its aspirations to grab one million customers worldwide, and target the US market for that growth.

Australian customers now exceed 120,000 and UK clients are more than 50,000 with 70 percent of its annualised subscription revenue from outside New Zealand, it said. Xero had 109,000 Australian customers and 47,000 UK clients as at March 31.

In April, Xero said it had slowed its cash burn with its cash outflow at $5.6 million in the three months ended March 31, slowing from an outflow of $6.5 million in the December quarter, and up from $2.5 million a year earlier.

The NZX-listed company's shares rose 0.5 percent to $29.30 today, and have shed 9.8 percent this year.

(BusinessDesk)

Comments and questions
12

Well done guys! As always, meeting or exceeding your targets.

No doubt good at sales, but at what cost!!

Had a first time look at the product at the field days, and they get AAA+ for functionality and presentation.

The problem is the business has to have a sufficient scale to justify the upfront and ongoing costs. And looking forward, like most software companies the 2015,2016, etc upgrade costs.

A simple excel spreadsheet, on your own website or google cloud, can perform the same function for a faction of the cost. May not look as good, but a faction of the cost.

Good question to ask would be how many clients they signed up at the field days, because the dozen or so staff and size of their stand wouldnt have come cheap.

It might sound like your business is too small or simple to support Xero, but the real benefits are in the automatic data feeds (never forget any expenses again) and in the ability to share one set of accounts with advisors, directors and so forth.

Xero's stand was pretty minor in the scheme of things at Fieldays. Waikato Milking, for example, laid a concrete slab, installed a chunk of a rotary (and so on and on) and had seemingly all of the team on site. They, like everyone else, have to bring that back to grass after the event.
Xero's stand was much smaller, indoors and was staffed by people both from within Xero as well as partner organisations like Deloitte Private.

You can only use google spreadsheets at a fraction of the cost if you don't value your own time. There aren't many customers questioning the value.

Not many companies would expect to make up their exhibition costs in direct sales at a trade show either.

If you ask me, there a few farmers that could justify the use of Xero software. The vast majority dont have sufficient scale.

Xero would have been better spending their investment direct marketing, rather than the shot gun approach of field days.

There'll be plenty of smaller business companies that recover their exhibition cost from direct sales. They have too. Larger businesses are there because their competition is, they are listed and spending other peoples money..

They took the latest, greatest month of 8.6m, and multiplied that by 12. Yes I know all the tech wannabes will cry out and say annualised revenue is standard in the tech space and it may be. But good ole xero - can't wait till it actualy completed 100m (you know, on a rolling 12 month basis like everyone else).

It's a misleading and disingenuous financial metric, in my opinion.

Agree the $100m is irrelevant, but what is important is the currently monthly revenues, growth rate and cash burn.

But also historic revenues are irrelevant for any business, they are history, what is important is the future. So when Xero hits $100m (on your measure) that two will be irrelevant.

Agree completely. These are interesting speculation metrics, but can be misleading where people (like NBR...) incorrectly report them as fact ("Xero hits $100m in annual revenue"), when they are not, they simply hit 8.6M last month. Can Xero point to a contract with their customers that says we have contracted 12mths out to 100M?

There's enough heat in this market already, surely we should be reporting what has actually happened and let the punters, as they wish speculate on what the revenue next March might be?

Xero software-as-a-service model, like that of others in its sector, sees people pay a monthly subscription fee. There's no minimum contract term. The figure is reported a annualised revenue. NBR has reported full Xero metrics in multiple stories, including cash burn eg here: http://www.nbr.co.nz/article/xero-shares-climb-11-percent-cash-burn-slow... and here: http://www.nbr.co.nz/article/analyst-sharpens-concerns-about-xeros-us-pr...

I do take the point on "annual" revenue in the BusinessDesk headline; this has now been tweaked to "annualised".

$100m in revenue - good milestone (either way it is measured). But one asks how the NZ Government / NZTE backed initiative of 100 IT companies doing $100m is going ------ dead and buried I suspect.

i suspect we have only 10 companies in that league and most of those will be foriegn owned - execptions, Datacom, Orion and soon Xero. Anyothers?

On page 11 of the Xero presentation dated 23 May the company mentions a "revenue churn" rate of 1.4% per month across the world trending down.

Some back of the envelope calculations show that churn rate as about 17% annualised . And the number for outside NZ looks like over 20%.

Both numbers seem very high for a software product which should be very sticky.