Monday, 07 April 2014 16:16

Xero takes it up to competitors in accounting software market Featured


Online accounting software company Xero is now claiming market leadership on the basis of revenues and growth in subscriptions for its products in the New Zealand, Australia and UK markets, with its latest financial report showing total operating revenues are up by 83% for the year ended March.

Xero’s latest results show it is an increasing threat to other companies like MYOB, Reckon and the big US company Intuit which is aggressively raising its presence in the highly competitive Australia-New Zealand regional online accounting software market with its flagship Quickbooks product.

In its statement to the NZX,  Xero (XRO) announced operating revenue of NZ$70.1 million for the 2014 year to 31 March, up from NZ$38.4 million in the 2013 financial year.

According to Xero CEO and Founder Rod Drury the company is expecting continuing strong growth in the three markets and will now “turn its focus on the important US market.”

Drury says the US market entry phase was completed successfully, allowing Xero to raise an additional NZ$180 million of capital in October last year, “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.”

Drury said 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 NZ$29 million, NZ$41 million and NZ$14 million respectively,” Drury said.

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

Xero does say that the strong New Zealand dollar adversely impacted reported operating revenue given 66% of this revenue is denominated in foreign currencies, and that on a constant currency basis the company grew operating revenue by 92% in the period to 31 March.

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

Drury says progress against the incumbents and Xero’s strong cash position places the company at the forefront, as the adoption of cloud software accelerates for small business solutions, and he expects strong growth to continue for the foreseeable future.

In its report, Xero reveals that the net loss after tax for the second half of the year ending 31 March is anticipated to be similar to that reported for the first half resulting in a full year loss of approximately NZ$35 million, compared to NZ$14.4 million last year.

The company reports that it has expanded its team to 758 employees and has NZ$210 million of cash to fund its growth, and has also made progress on a number of large scale partnerships, including the recently announced integration with Square Inc. in the US.

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Peter Dinham

Peter Dinham - retired and is a "volunteer" writer for iTWire. 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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