A great finish to FY14

We feel very proud to report on FY14. 

Please let me know if you have any questions.

MARKET RELEASE

Xero finishes year up 83% to $70m

4 April 2014

(Note: all currency is in New Zealand dollars and results are unaudited)

Xero Limited (XRO) announces operating revenue of $70.1m for the year ended 31 March 2014, up 83% from last year’s $38.4m result.

With monthly committed subscriptions growing to $7.8m, the recurring revenue model means that Xero commences its 2015 financial year strongly with $93m in annualised subscriptions (representing an 81% increase on the $51.5m reported at the same time last year).

The net loss after tax for the second half of the year ending 31 March 2014 is anticipated to be similar to that reported for the first half resulting in a full year loss of approximately $35m, compared to $14.4m last year. Xero has expanded its team to 758 employees and has $210m of cash to fund its growth.

Xero up 83 percent to $70m in FY14

The strong New Zealand dollar adversely impacts reported operating revenue given 66% of this revenue is denominated in foreign currencies. On a constant currency basis Xero grew operating revenue by 92% in the period.

FY14 commentary

Recruiting senior management for growth and filling out global teams was  a key focus for the 2014 financial year as Xero added a further 376 employees.

Xero is now the leading accounting software provider in New Zealand and the leading online accounting software in Australia and the United Kingdom, with annualised subscriptions of $29m, $41m and  $14m respectively.

With strong growth expected to continue in these markets, Xero turns its focus on the important US market. The US market entry phase was completed successfully, allowing Xero to raise an additional $180m of capital in October 2013, bolstering the Board with appointments of New York-based Chris Liddell as Chairman and San Francisco-based Director Bill Veghte and appointing Peter Karpas as CEO North America.

Xero has been receiving US industry recognition, including: Accounting Today’s 2013 Top New Products: Honorable Mention – Xero Touch, Mobile category; CPA Practice Advisor’s 5-Star review 2013 (for Software as a Service); and “Top Choice” for the best online business accounting app by PC World/ Macworld.

Xero has also made progress on a number of large scale partnerships, and has recently announced integration with Square, Inc. in the US.

Regional breakdown

Xero regional breakdown for FY14

Xero has proven its strategy and execution and continues to build a world-class team, while substantially growing revenue.

Progress against the incumbents and its strong cash position places Xero at the forefront, as the adoption of cloud software accelerates for small business solutions.

Xero expects strong growth to continue for the foreseeable future.

END 

23 Comments

Chris
April 4, 2014 at 10:26 am

Congratulations on the great result.

Of the 758 employees, about how many are on the ground in the US and can you say how many more you expect to add there in the coming FY?

James
April 4, 2014 at 11:12 am

Nice work. Love how the nz herald sums up the year’s achievements with “Xero loss doubles” headline as if you raised $200 million to sit in the bank.
Only 361 days left to get to half a million customers. Go hard. Every year I think you have a near impossible task ahead and you manage to pull it off. Congratulations.

Liam
April 4, 2014 at 12:27 pm

Out of interest, an article on how you’ve doubled employee numbers in a year and managed that growth without sacrificing culture would be great.

For me, this is the most mind boggling of all the Xero numbers.

Rod Drury
April 4, 2014 at 4:25 pm

@chris around 150 in the USA. Haven’t said how many more. We are doing a lot of Product dev there as well as sales and support.

@james thanks

@laim good idea. The essence is having clear set of values, living those values, a rigorous recruitment process, good induction and dealing with any less optimal hires quickly are the key factors.

Heather Smith
April 4, 2014 at 5:35 pm

Congratulations on a positive result.

Amazing that the year on year change in Australia and United Kingdom was 114%.

It would be interesting to know the growth in relation to marketing spend per country. :)

Funny:
I gave a door prize – a big Xero stationery box – at a business networking function last night and the audience got quite excited cause they thought it was a Tiffany’s box :)

Nish Veer
April 4, 2014 at 5:49 pm

Inspirational work Rod! Great seeing an NZ cloud company have this kind of growth. Keep it up.

Jody Hollis
April 4, 2014 at 7:19 pm

Fantastic work guys. Delighted to be partnering with you.

Elizabeth Salter
April 4, 2014 at 7:45 pm

Wowzers! Great stuff!

Rod Drury
April 4, 2014 at 8:54 pm

@heather I’m still not convinced you can traditionally market to small business. We are trying and measuring.

Most of our marketing spend is smart people building content to help educate small business owners.

Ricardo
April 4, 2014 at 9:46 pm

Congratulations! You are able to achieve both growth in Subscription Revenue and additional add on to the software and secure a deal to partner with KPMG and SQUARE

I understand high costs is necessary for the company to continue to grow in a faster pace.

Keep up the great work. Never become complacent. Go USA, UK and Australia Xero Business!

Looking forward to see customer numbers in excess of 500,000 by 31 March 2015. :)

By the way, what is your target number of customers by 31 March 2015?

Best wishes for Financial Year 2015!

Jason Hollis
April 4, 2014 at 11:26 am

An interesting stat would be % of users who were adopting accounting software for the first time vs migrations from existing products.

Romeo
April 4, 2014 at 11:35 am

One analyst doubting the result for cracking the USA? If these figures are doubtful then it just goes to say that you eat an elephant or a monster in the name of INTUIT one bite at a time.
Once again, CONGRATS to all Xero employees in making “this beautiful accounting” more handsome every passing year.
And of course, we are confident too Rod.
Thanks.

Rod Drury
April 4, 2014 at 12:22 pm

@Richardo. We haven’t put out targets into the market but as we get into the year we’ll set expectations as to likely revenue for FY15. We should shortly be on $100m run rate so expect to pass that milestone this year which is a big one for us.

@Jason about half of our customers are first time into accounting software so well designed cloud solutions are growing the market

@Romeo we feel like we’ve delivered on all our promises in 8 years. We’ve had the discipline to ensure UK and AU growth is assured and we can now turn our guns on the US market. Our market entry has gone well and we’ve gained enormous insights.

We have a great competitor there but we think we have the best people, product and sufficient resources to make a dent. We understand that a focus of the business for FY15 will be to show US traction and feel confident we’ll do that this year.

This year we’ve substantially grown our team. That’s a huge amount of work. But we have so much more capability now.

We look forward to reviewing progress in 12months.

Heather Smith
April 4, 2014 at 12:29 pm

@Rod

Yes * authentic * plain English * usable * independent content is a significant factor in influencing time poor Small Business owners.

Elaine Mullen
April 4, 2014 at 3:15 pm

@RodDrury
Congratulations. Love everything Xero! Your long term plan is sound and working. You’ve created the right brand, you have recruited great people and you’ve got an almost cult following. ???? I will be following Xero for a long time to come.

Cormac
April 4, 2014 at 9:25 am

@RodDury

Mate need to to create a fully integrated ERP. Love to see the NZ team crush the big boys! perhaps then we can back the next americas cup? Give us a yell if you need more number gurus!

Looking at the stats ARPU shows a slight growth about 1%? but given the roll out of soultions assume that its better to rely on the pro-forma basis? Being in a strong cash postion would be good to see this being used to acquire a mature market customer base to grow the brand.

All the best with the investors, give the high market-cap its hard call between managing the short term expectations and longterm net profit.

Ricardo
April 4, 2014 at 10:53 am

Hi Rod, I am hoping and praying that xero will not only make a dent but also totally penetrate the US market- sharp increase in market share. Prayer is very powerful tool too. It can move mountains. Thank you all for your tremendous efforts. Great job!
I am looking forward to read the developments in the next 12 months.
Go Xero USA!

James
April 4, 2014 at 9:58 am

Just read a stuff article about how you ‘appeased’ investors with this result?! Not sure which investors they interviewed… I’ve paid off the mortgage, pumped cash into my own business and won’t sell any more shares for love nor money. I can only assume the journalist is on drugs.

Anna
April 4, 2014 at 4:37 pm

Good result, but does the North America number also include customers from Canada and maybe Mexico?

Rod Drury
April 4, 2014 at 5:19 pm

@Anna a few from Canada, everyone else in ROW. Next year we may do a Canadian specific product.

Simon Magner
April 4, 2014 at 2:46 pm

Great results Xero, onwards and upwards. First time in my life I have have had non accounting clients get excited about their accounting program. To the point that I was asked to stop reconciling the bank because they enjoyed it too much!

Todd
April 4, 2014 at 7:15 am

Hoping you stick it to Intuit in the US market. They’ve dominated for far to long and as a result have become lazy and unresponsive to customers.

Ricardo
April 4, 2014 at 10:49 pm

@ Todd I am hoping and praying for the best – that the small and medium business will give Xero a fair go…
I am sure Xero is working very hard towards cracking the US Market. When it happens, it will be a big influence to the other countries to follow…

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