Xero losses deepen by $20m but CEO says it's on-track

Xero has copped yet another loss as it ploughs money into R&D in its quest to gain market share in the accounting SaaS market.

For the half-year ending 30 September, the Kiwi company recorded a NZ$44.3 million ($40.1 million) net loss – almost NZ$20 million worse than the equivalent period last year. The company suffered a similar NZ$45 million loss in the directly preceding half year ending 31 March.

The company attributed the losses to "increased investment in product development and distribution channels", with chief executive Rod Drury saying it was on-track for "long-term value creation".

"Xero delivered strong global growth while improving operating metrics, reflecting positive overall business performance."

The vendor increased its global subscriber base to 593,000 as of 30 September – a 60 percent or 222,000-subscriber growth in the preceding 12 months. In revenue terms, Xero raked in NZ$89.8 million for the half-year, up 72 percent year-on-year.

"We’ve achieved strong growth for the first half and we’re on track to achieve NZ$200 million subscription revenue based on June 2015 foreign exchange rates this financial year. Xero is focused on containing its full financial year cash outflow to similar levels to the prior financial year."

Drury attributed the growth to Xero's focus on the small business segment, citing it as a difference to its rivals.

"While early SaaS companies have been focussed on medium-to-large enterprises, our connected ecosystem gives us access to the global small business market, positioning us to maintain strong growth rates for an extended period of time and drive further revenue monetisation opportunities," he said.

In Australia and New Zealand, Xero claims the mantle of market leader in the cloud accounting software sector, with 425,000 customers. The North American subscriber population grew 114 percent in the half year, according to the vendor, and the company became the first small business cloud accounting provider to reach 100,000 users.

Xero last week appointed Intergen founder Tony Stewart as its new chief data officer, and in its results announcement referred to that move to highlight its strategy of "accelerating automation and big data innovation".