Xero picks growth over profit as revenue doubles
Focusing on expanding presence in US and Australia.
Friday, January 27 2012 || News || BY Jason Krupp, Businessday.co.nz
The doyen of Wellington's digital start-up scene said in a statement today it sees earnings for the year to March 31 coming in about $18.6 million, twice that of the previous year. On a monthly basis, committed revenues are now $1.75m, with about half of that coming from markets.
Xero reported a net loss of $3.7m for the six months ending September 30. On a full-year basis, the company posted a net loss of $7.5m for the 12 months ending March 31.
''The focus is not on breaking even but on grabbing market share and driving revenue, and clearly that strategy is working,'' based on today's revenue estimates, said chief executive Rod Drury.
Reaching break-even had previously been a major milestone for the company, but it shifted strategy in the middle of last year with the acquisition of Australian online payroll provider Paycycle.
Drury said Xero's attention is now on growing its share of the US and Australian market, where the greatest opportunities lie but where it also faces the strongest competition from incumbents Intuit and MYOB.
Xero and MYOB have been locked in a bitter war of words recently, with the Australian accounting software firm attacked its rival via a YouTube video in December, in which former Xero client Michael Prasad Group extols the benefits of the MYOB platform (http://www.youtube.com/watch?v=hkgevgtqh2s).
A Xero spokesperson said Michael Prasad Group had subsequently switched back to Xero, although this could not be confirmed at the time of going to print
Meanwhile, Xero has taken great pains to draw attention to MYOB's recent update of its flagship AccountRight software system, which crashed some customer's computers and was described in the Australian press as ''ridden with bugs''.
Xero said it now has 60,000 paying customers worldwide including 3300 accounting firms, equating to 240,000 user accounts, which Drury said put it on track to reach its goal of a million users.
That expansion has been funded by cash reserves and by tapping investors such as PayPal founder Peter Thiel for more capital. Additionally, Xero was recently awarded $4m over a three-year period as part of a technology development grant from the Ministry of Science and Innovation.
Drury said there were no immediate plans to tap the market further and the company was carefully managing its cash reserves, but it was confident the business wouldn't have ''issues attracting capital'' if needed.
As of September 30, Xero's cash holdings stood at $11.4m, with an update on this position due when its reports its full year results later this year.
Xero shares rose 4.7 per cent today to $2.67, after rising 5 per cent yesterday.
The stock has declined 6.6 per cent over the past 12 months.
