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Thursday 16 May 2019

Important 'firsts' for Xero in FY19

logoWith strong FY19 results that delivered some important ‘firsts’, Xero continued to live up to its position as a challenger within the SME accounting software market. Those ‘firsts’ included maiden net profit, albeit of just $1.4m and in H2 only, and at $6.4m its first positive free cash inflow (vs. the $28.5m cash outflow of the prior year).

As TechMarketView highlighted in Xero scopes the transformation opportunity, the New Zealand founded company is going from strength to strength in a market segment where regulatory changes, such as the UK’s Making Tax Digital, and demand for easier to use, cloud based software are creating opportunities for technology providers. With 36% revenue growth to $552.8m in the year to 31 March 2019, Xero is taking full advantage of the environment.

While the company saw impressive growth in all the regions it operates in, the UK continues to be a major growth market. Boosted by the April 2019 Making Tax Digital deadline, UK revenue expanded 50% yoy to $120m and added 151k subscribers (a 48% yoy increase), taking the UK total to 463k. The worldwide subscriber number hit 1.82m, a 31% increase.

Xero is still a small company compared to those it is challenging - Sage, Intuit and even re- emerging UK provider Iris Software Group - which is a contributor to those high growth levels. And it is still in growth mode so the bottom line is not as comfortable as it is for the larger competitors. Although EBITDA improved (from $48.2, to $73.2m), Xero’s net loss deepened to $27.1m from $24.9m. The challenge will be growing on that slim $1.4m H2 profit to show it was not a blip.

FY19 saw some acquisitions – Hubdoc in the data capture area, and tax filing and compliance software provider Instafile in the UK – and these present further opportunities to build top and bottom lines. As does Xero’s platform ambition; with 128% platform revenue growth in FY19 this is a revenue line that is expanding, providing services with the scope to embed Xero deeper into the operational fabric of its customers. 

Posted by Angela Eager at '09:24' - Tagged: results   saas   cloud   software  

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