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Freshly-installed CEO delivers early wins in full year results to March.
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Xero shares soar on leap in revenue, subscribers
19 May 2023
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Xero shares leapt 8 per cent to their highest level in more than a year yesterday on the back of a 28 per cent jump in revenue to $NZ1.4 billion ($1.32 billion) for FY23.
The result was driven by a 14 per cent lift in subscribers to 3.74 million and a 10 per cent rise in average revenue per user, the full year results to March showed.
Free cash flow rose dramatically from $NZ2.1 million to $NZ102 million however the company’s bottom line was hit by substantial restructuring costs following an announcement in March of 800 job cuts.
Xero’s net loss after tax widened to $NZ113.5 million from $NZ9.1 million in the previous year, with EBITDA down 26 per cent to $NZ158.4 million.
CEO Sukhinder Singh Cassidy said the result was underpinned by subscriber growth and showed Xero’s resilience in a challenging environment.
“We’re pleased to deliver a strong operating result supported by our program to improve operational efficiency and effectiveness,” she said. “This gives us greater ability to deliver better value for all stakeholders and take advantage of the significant opportunity ahead.”
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“We’re positive about the multiple levers Xero has to deliver growth – including driving further adoption of cloud accounting and deepening customer engagement – as we strive to deliver the world’s most insightful and trusted small business platform.”
Impairment costs included $NZ77.9 million due to the write-down of tech acquisition Planday, $NZ48.5 million of impairments and other costs related to the closure of lending platform Waddle and $NZ34.7 million in restructuring costs.
Xero said Australia and New Zealand continued to lead the world in small business cloud accounting adoption and were responsible for more than half the net subscriber growth.
Australia added 222,000 net subscribers for a total of 1.57 million while New Zealand added 55,000 for a total of 567,000 subscribers.
Product updates during the year included changes to Xero Payroll to help Australian customers manage compliance for the transition to STP 2, and Xero remained “focused on localising its product to meet customer needs”.
For FY24, Xero targeted an operating expense to operating revenue ratio of around 75 per cent, improving on the FY23 figure of 81 per cent.
“Xero’s long-term aspiration is to continue to improve its operating expense ratio and its operating income margin, although a specific timeline has not been set,” it said.
Xero shares traded above $100 yesterday and finished the day at $102.49. Its stock has risen from sub-$70 lows during the last quarter of 2022 following the appointment of Ms Singh Cassidy in February.
Her career takes in 25 years of global leadership experience, including as president of Asia-Pacific and Latin America at Google, president of StubHub, founder and CEO of Joyus, and public and private board experience with multiple companies.
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