Thursday, 12 May 2016 11:51

Xero revenues rise but investment in expansion costly Featured


Cloud accounting software company Xero has increased revenue and lifted its global paying subscribers to its accounting platform to 717,000 for the full year to the end of March as it continued an aggressive international expansion plan in major markets including the US, UK and the Asian region.

Reporting Xero’s results for the 2016 financial year, CEO Rod Drury said the company had posted operating revenues of NZ$207.1 million for the year to 31 March – an increase of 67%.

But, significant new investment in its overseas business expansion saw Xero post a rise in net loss to NZ$82.5 million from NZ$69.5 million.

The strong growth globally prompted Drury to claim Xero is the “market-leading small business cloud accounting software in Australia, New Zealand and the United Kingdom, based on number of subscriptions”.

“We have also made good progress in the competitive United States market where the accounting industry is early in its migration to cloud technologies. Our global experience and platform investment positions us well as the transition to cloud-based business software continues its momentum,” Drury said.

Drury highlights global growth achievements including:

•    Australia and New Zealand markets reached $177.9 million in annualised committed monthly revenue with half a million subscribers in April 2016

•    Strong international growth with the UK growing to 133,000 subscribers and North America to 62,000 subscribers

•    Opening of Xero’s first Asia region office in Singapore to meet demand particularly in Hong Kong, Malaysia and Singapore%

In the Australia, New Zealand region market, Xero now claims half-a-million cloud customers.

Drury describes the ANZ market as a “test bed lab” for the rest of the world and says in the company’s home market of New Zealand it has a 30% share of the small business market (SMEs). “We put through a price increase without much push back and we continue to win marketshare from competitors,” Drury said.

Drury also makes the point that revenue growth is outpacing customer growth, “which means we are targeting customers who drive great lifetime value and improving the overall value of the business”.

On the security of its platform, Drury says Xero has made a “massive investment” in bolstering security measures over the past year in the face of a “big escalation” in security concerns in the market.

“We have put a lot of security at the gate of our platform as well as delivering innovation at product level.

Security measures upgraded by Xero include the deployment of two factor authentication, measures he says were vital as the “financial web version plays out”.

“We completed a 2-year program migrating to Amazon Web Service (AWS) and this gives us a competitive advantage.”

Xero says over the past 12 months it has connected to more banks and financial institutions globally and, according to Drury, “in the future, intelligent data matching in Xero will automatically code banking transactions, making accounting even easier for small businesses”.

And, in the US market, Xero says it has been making progress with major bank integrations, and globally the focus will be on capturing the benefits from banking relationships to drive growth.

“In the past 12 months, the Xero platform has been used to record more than $1 trillion of activity across more than 450 million incoming and outgoing transactions. Our vision is to use software to rewire the global small business economy by connecting small businesses to their trading partners,” Drury said.

“In a market of tens of millions of potential customers, we’re only just getting started. Our subscriber base continues to grow and we have remained focused on financial progress, and taking further steps towards value-added growth.”

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Peter Dinham

Peter Dinham - retired in 2020. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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