Annual Report 2012

Out tonight is our Annual Report to 31 March 2012.

Xero delivers offshore growth – full year results 2012

Annual Report

Some the headlines were:

  • Revenue increased $9.3 to $19.3m (107%)
  • Expenses increased $18m to $28.4m (58%) – as we grew staff from 113 to 194 people
  • Loss increased slightly from $7.5m to $7.9m (5%)
  • Customers grew from 36,000 to 78,000
  • Cash grew from $16.9m to $39m following our capital raise

You can see the power of the cumulative monthly model as revenue has grown from $3m to $9m to $19m at an annualized run rate at March of 25m heading into this financial year.

We are very proud that more than half of monthly revenue is now outside of our home market and that Australia tripled revenue.

Following our capital raising we will continue our growth phase and plan to continue to invest significantly in our platform and team.  We’ll provide a full update on strategy and plans at our Annual Meeting on the 26th of July.

Our biggest challenge is continuing to hire great people. We have so much more to do so if you are interested please check out xero.com/careers

Again we’d like to thank our customers, partners and shareholders for giving us the opportunity to build a business that is making a difference. I’d also like to thank our wonderful team for the passion they bring to everything they do.

We’d welcome your questions below.

 

28 Comments

Shaun Pyrah
May 25, 2012 at 11:19 am

Why is it you charge Australians $49 per month (AUD) for what the Americans only pay $29 (US)?

Rod Drury
May 25, 2012 at 11:27 am

Firstly, the Australian currency has got much stronger, but we also provide a lot more features in the Australian version of the product such as BAS returns and from early next week a full payroll package.

Labour rates in Australia are much more expensive as well and we have a big team there.

We believe we’re proving great value for Australian small businesses and are continuing to invest and innovate on Australian specific features.

Chris
May 25, 2012 at 12:36 pm

This is exciting news and I’m looking forward to seeing how the USA expansion goes in the coming 12 months.

Nolan lesueur
May 26, 2012 at 12:07 am

Keep up the great work XERO, it’s always a pleasure moving clients to your product

Jeff
May 26, 2012 at 9:22 am

As a Xero fan and shareholder, I am surprised to read that the 78,000 customers are spread across only 3600 accounting firms giving an average of around 21 customers each. I guess there are various factors around weighting local market vs overseas in terms of take up, but i would have thought that average number would have been higher given Xero has been around for so long and is so proven. Is it that accounting firms are only using Xero for some of their customers?

Rod Drury
May 26, 2012 at 10:53 am

Hey @Jeff, good question. If you look at our accountants directory you’ll see Platinum, Gold, Silver and Bronze partners. Platinum is 500 Xero customers, Gold 100 and so on.

Over the last few years we’ve been focussing on ‘recruitment’ of accountants so they join our partner program and get their first few customers on to see what we do. Then we ‘educate’ them – which is getting their teams trained on Xero and then we ‘grow’ Xero inside their customer base. The early adopter firms are the Platinum and Gold partners who are shifting large numbers of customers.

From a shareholder perspective you may think we’ve been around for a while but from an accountants perspective we’re still the new kids on the block. Getting accountants to change their platform is a big deal. But clearly we are. This is also why we’ve been investing heavily in the ‘accountants side’. It delivers customers.

So we’re very pleased that we already have a relationship with 3600 firms. They have had their early Xero experiences and are on the journey through a transition process that we know works very well.

Having got to 78k customers, while being in the early phases, we think demonstrates the enormous growth potential of the accountant channel.

Melissa
May 27, 2012 at 2:07 am

I still want to buy shares and haven’t heard back about how to do that here in Aus. However, congrats on the great stats and I wish you were hiring in Perth 😉 xx

Anna
May 27, 2012 at 10:41 pm

@Rod
How many customers does accountants practice need to have to become Silver & Bronze? Is it is 50 for Silver, 10 for Bronze?

Rod Drury
May 27, 2012 at 11:47 pm

@Anna, if you want to become one of our partners and explore all details in our partner program you can register here http://www.xero.com/partners

@Melissa, have you asked your broker? What did they say? Please fire a note thru to careers if you think you can help. You never know.

Xero doubles revenue, customers
May 28, 2012 at 6:06 pm

[…] continue to invest in our internal infrastructure, systems and personnel around the globe.” Go here for more. […]

Anna
May 28, 2012 at 9:37 pm

@Rod, I don’t work as an Accountant. I’m just interested in the amount of customers an Accountancy Practice needs to become Silver and Bronze.

Rod Drury
May 28, 2012 at 9:38 pm

@Anna I know :)

Anna
May 30, 2012 at 7:57 pm

@Rod

Catherine was happy enough to answer the question at Xero User Forums.

Mike porter
May 31, 2012 at 12:13 am

Hi Rod
What was the purpose of the investor slide deck nzx release. It was a succinct overview of present position / strategy / potential. But why release now ? Were you simply updating institutions ? So released to advise market?
Will we hear more at AGM on non primary market strategy, SA Canada Singapore et al?
Do you see any reason other than it seeming to good to be true, why your market share couldn’t end up replacing / replicating incumbents (or at least chunkier %). Feels to me like nz will settle closer to 60-70% in 5years… A gut view only.. If that’s the way dynamics played out in desktop era why wouldn’t they continue to replicate this in cloud era? Accountants haven’t historically operated advocating multiple product choices to clients. Why would they now, especially as conversion tools proliferate and it’s fairly straight forward to migrate away from old systems. .
Also stats on growth rates of early adopter acc practices actual own businesses must provide compelling buy case / push xero case. This assumes early adopter practices have expanded their practices by offering xero as point of diff. In nz where it’s a little more mature do you see practices deploying as a defensive measure yet ?
Looking forward to agm, 100k users and Aussie significant practice and bookkeeping base feeding growth rates.
Mike

Rod Drury
May 31, 2012 at 12:23 am

Hi Mike,

We did a investor update yesterday afternoon following our annual result last week so had to release the presentation to the market.

Our annual meeting is our primary investor event and we’re looking forward to having the time to go into more detail on what we’re seeing.

Xero doubles revenue, customers
May 31, 2012 at 1:06 pm

[…] here for more. Share this Tweet […]

Anna
June 7, 2012 at 10:10 am

Congratulations on qualifying for NZX 50 index.

arina
August 18, 2013 at 10:50 am

Hi

In 2012, why has your interest received drcreased in cash flow even though theres more in term deposits cash and equivalents?

Ria
August 19, 2013 at 1:05 am

Why has Xero Ltd paid income tax in NZ even though they are making loss for 2011 and 2012 as well?

Paul Williams
August 19, 2013 at 12:11 pm

@Arina – The average cash balances over the 12 months in 2012 were lower than 2011. Xero raised a significant amount of capital in the final quarter of the 2012 financial year.

@Ria – Xero pays tax at a Group level in respect of its overseas subsidiary profits which can not be offset against the tax losses in New Zealand.

Ria
August 22, 2013 at 7:19 am

Hi

In the annual report, there is no mention of dividend payout. Is it because Xero at 2012 did not have any retained earnings?

thanks

Ria
August 22, 2013 at 7:40 pm

why there is no mention of dividend payout. Is it because Xero at 2012 did not have any retained earnings?

thanks

Rod Drury
August 22, 2013 at 9:19 pm

Dividends are paid from profits, a portion of which might be distributed out to shareholders as a dividend. Xero is still in an investment phase where spending is ahead of revenue. We are investing for future growth.

As we don’t yet make a profit, we don’t pay dividends.

For high growth companies, reaching profitability does not automatically mean you pay dividends. We may use future cash surpluses to future invest for growth or build a defensive warchest of cash that might be used for acquisitions. If you look at Apple for example they have built up a massive warchest and only recently began paying dividends.

There are numerous ways for companies to distribute proceeds back to shareholders. Share buy backs are common method that are worth looking at.

I’m certainly looking forward to when we pay dividends but it’s likely to be a few years yet.

Hope that helps explain.

Ria
August 23, 2013 at 3:58 pm

That’s clear now. Also, share buy backs are same as repurchase? What are other ways which you distribute proceeds to shareholders.

Rod Drury
August 23, 2013 at 10:41 pm

Yes. We provide yummy pass arounds and drinks at our annual meeting.

Ria
August 25, 2013 at 10:15 am

What purchases has Xero made in Property,plant and equipment?

Ria
August 25, 2013 at 12:56 pm

Xero has a high working capital, liquid ratio but an outflow in operating activities so Xero was not able to pay its suppliers in short term?

Rod Drury
August 25, 2013 at 1:11 pm

Ria, as we have raised capital we can spend more than we earn. That is the idea of investing and if you look at our financial statements you’ll see we have over $60m in cash.

These questions should probably be best asked of your teacher so you understand the core concepts, and then come back with anything you collectively don’t understand. Saying not paying suppliers is not appropriate for a public blog.

Good luck with your studies.

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