Xero revenue booming, but cops yet another loss

Cloud accounting vendor Xero has nearly doubled its net loss after tax to NZ$69.5 million for the 2015 financial year, even as revenue continues to climb.

While revenue and customer numbers are booming, Xero’s loss for the year ending 31 March was 96 percent higher than the previous year.

The software vendor recorded a NZ$35.5 million loss for the 2014 financial year, which followed a NZ$14.4m loss for 2013, a NZ$7.9 million loss in 2012 and a NZ$7.5 million loss in 2011.

The company has taken pains to point out that its losses reflect the millions it has poured into product development, and sales and marketing.

In a previous financial report it added a statement from a US investment firm explaining that SaaS businesses face significant losses in early years as they acquire customers, and profits are recovered over a long period of time.

That investment has seen Xero add hundreds of employees, with 403 new staff added in the year. In its 2014 financial year, the company spent NZ$55.1 million on sales and marketing – that figure climbed to NZ$93.5 million for the 2015 financial year.

The company is also ploughing tens of millions into product development, with spending in that area up from NZ$18.4 million to NZ$49 million.

Xero chief executive officer Rod Drury told CRN: "As with many software-as-a-service companies, we have a long-established plan at Xero to invest heavily in long-term growth, and that’s been shown in our incredible growth across our key markets.

“We would love to get to profitability as soon as we can, and we will at some point in the future, but not at the expense of growth. We hired 403 new staff in the past 12 months to meet those growth objectives, so it should be no surprise that our loss widened.

"We expect that hiring growth to slow down this year, while our revenue growth continues. We also have $264 million in cash so we are well prepared to continue to grow heavily in the cloud accounting space.”

The investments have paid off in terms of revenue and customers. Global subscription revenue grew 88.9 percent to AU$112.2 million. In Australia, revenue grew 104 percent to AU$55.2 million.

There are now more than 203,000 Xero customers in Australia, up 86 percent from 109,000 customers the previous year. Globally, Xero has 475,000 paying small businesses customers, an increase of 67 percent.

The company will continue to invest to fuel growth and scale while maintaining its focus on building a high margin business model, according to a statement.

Meanwhile Xero's chief financial officer Douglas Jeffries has resigned, after only recently joining the leadership team.

“This was a very difficult decision given Xero’s momentum and business potential. The decision to leave is entirely based on my personal objectives and the timing is in no way a reflection of business or financial reporting concern,” said Jeffries.