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UPDATED: Global restructuring is essential to cut costs says freshly installed CEO.
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Xero to cut hundreds of jobs, close Waddle app
09 March 2023
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Xero will cut up to 800 jobs globally and shutter its lending platform Waddle to reduce costs and achieve a “better balance of growth and profitability” the company said today.
The move was part of a wholesale reorganisation to reduce costs that would involve up to $40 million in write-downs this financial year and up to $35 million in restructuring costs in FY24.
It comes just weeks after tech high-flier Sukhinder Singh Cassidy took over as chief executive from Steve Vamos, who moved aside at the beginning of February.
Ms Singh Cassidy said it was essential to streamline the cloud accounting software company.
“We aspire to build a higher performing global SaaS [software-as-a-service] company and to enable Xeroʼs next phase of growth and drive better customer outcomes, we need to streamline and simplify our organisation,” she said.
“These changes, and our decision to reinvest in key strategic areas, will adjust our operating cost base as we balance growth and profitability, while taking a robust approach to capital allocation that supports long-term value creation.”
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The company said the job cuts, expected to be 700-800 globally from a workforce of around 5,000, were part of a reorganisation of its structure and investment priorities.
“These headcount reductions will improve Xeroʼs operating profitability as its operating expense to revenue ratio is expected to reduce significantly in FY24,” it said.
Management was targeting an operating expense to revenue ratio in FY24 of around 75 per cent and would issue updated guidance in May.
“Xero maintains its current guidance for FY23 that total operating expenses (including acquisition integration costs) as a percentage of operating revenue for FY23 are expected to be towards the lower end of a range 80-85 per cent. This excludes restructuring charges associated with this program - expected to be $25-35 million.”
These would mainly be incurred in FY24 although exiting cloud-based lending platform Waddle – which Xero acquired in 2020 – would involve a write-down of $30-40 million this financial year.
Xero said it remained committed to its broader small business platform strategy.
“These are difficult but necessary steps as we work to further strengthen Xero for the future while carefully balancing the interests of all our stakeholders,” Ms Singh Cassidy said.
“We don't take these decisions lightly and we recognise today is a very hard day for our people.
“Todayʼs announcement does not take away from the significant contributions from everyone at Xero. We take our purpose and values seriously, and are committed to working closely with each impacted employee and providing them with the right level of support.”
Xero shares leaped more than 7 per cent on the news, and were trading at close to $87 by the end of the day. Xero's reductions follow a spate of local tech lay-offs that include 500 jobs at Atlassian this week to more than a dozen at Ignition in January. Globally, the tech picture has been bleak with thousands of jobs going at high-profile companies ranging from Twitter to Google parent Alphabet.
Xero has 3.5 million global subscribers for its software which takes in accounting, payroll, workforce management, expenses and projects, along with around 1,000 apps.
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