Xero posts 67% jump in full-year revenue, wider loss of $82.5m

The company said its net loss was $82.5 million in the 12 months ended March 31. UPDATE: Shares fall.

Xero [NZX: XRO], the cloud-based accounting software firm, said it has sufficient cash reserves to reach breakeven without having to raise more capital, after posting a 67% jump in full-year operating revenue and a wider net loss.

In mid-afternoon trading, its shares were down 1.34% to $15.47.

The Wellington-based company said its net loss was $82.5 million in the 12 months ended March 31, from a loss of $69.5 million a year earlier. Operating revenue rose to $207 million from $121 million but was swallowed up by a 53% increase in operating expenses to $249 million as the company focuses on building its subscriber base.

Xero used up $86 million on operations and investments in the latest year, down from $88 million a year earlier. It had cash and equivalents of $184 million at year-end, down from about $203 million at December 31, suggesting it burned through about $19 million in the final quarter and has at least two more years to reach breakeven before needing more funds. Paid subscribers jumped to 717,000 in 2016, from 475,000 in the 2015 March year.

"We have extended our position globally, and lead the small business cloud accounting software market in Australia, New Zealand and the UK by subscriber numbers," chief executive Rod Drury said in a statement.

Annualised committed monthly revenue, a favoured metric for tech companies, rose 62% to $257.9 million and its ebitda margin improved to -29% from -49%.

Xero achieved the fastest percentage growth in the key North American market, where operating revenue jumped 116% to $16.9 million. That's still just 8% of total operating revenue. In its biggest market of Australia, revenue climbed 65% to $96.7 million and in New Zealand it climbed 42% to $46.7 million. Operating revenue in the UK surged 88% to $37.4 million.

The company gets more than 77% of sales in foreign currencies and said its offshore revenue was affected by a weaker kiwi dollar. In constant currency terms, operating revenue rose 60% to $198 million. Sales and marketing costs in the latest year rose 60% to $148 million, or 72% of operating revenue. In the 2015 year, those costs amounted to 75% of operating revenue.

Product design and development expenses rose 53% to $69.7 million. Xero's total headcount increased 25% to 1454 in the year ended March 31.

Xero's shares fell 0.5% to $15.60 on the NZX and have dropped 20% in the past 12 months. The stock is rated a "buy" based on the consensus of seven analysts surveyed by Reuters. Shareholders have been taken on a wild ride by the shares in the past five years, with a peak of $45.99 in March 2014 after a steep ascent, followed by an equally steep decline to reach $15 in October of that year.


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