Xero stays on target with accelerated cash burn as it takes on staff
Xero [NZX: XRO], the cloud-based accounting software company, said a 47 percent increase in quarterly cash burn is on budget as it hires workers and takes on rival Intuit in the US market.
Xero's net operating and investing cash outflow rose to $17.3 million in the quarter ended June 30, from $11.8 million three months earlier, the company said in a statement. Staff costs rose to $19.1 million from $12 million and were up 88 percent from the June quarter last year. Cash holdings fell about 8 percent to $192.7 million.
The company doubled staff numbers to 758 in the 12 months ended March 31 and has continued to hire workers as it attempts to scale up to a profitable size. The company told shareholders at their annual meeting last month that it is considering a listing in the US after it reaches annual revenues of US$100 million, expected in this financial year, and has tapped former Microsoft chief financial officer Chris Liddell as chairman.
"From our perspective, there are no surprises," said Darryl Robinson, Xero's general manager group finance. "The quarterly cashflow results are in line with our targets and are reflective of our growth plans."
The shares fell 2.5 percent to $24.77 and have shed 21 percent this year. That's still above the $18.15 a share that US investors including Matrix Capital Management and the Peter Thiel-backed Valar Ventures paid in a capital-raising last October that gave Xero a $180 million cash infusion. At the rate it used cash in the June quarter, it has enough for at least another 2 1/2 years.
Sales were $23.5 million in the June quarter, up from $20.4 million three months earlier and up 81 percent from the same period last year
Chief executive Rod Drury told shareholders last month that America's incumbent accounting software provider Intuit is "spooked" by the arrival of Xero and was adjusting its strategy and products to protect market share from its upstart rival.
"Intuit's a formidable, large company in the US, but it's important to recognise that of something like 30 or 40 million small, medium businesses in the US, Intuit's customer base is five million," Drury told BusinessDesk after the meeting.