Xero is earnings positive for the first time

Xero CEO Rod Drury. Image: Alex Heber.

Xero, the cloud-based subscription accountancy package, still isn’t making a profit but future expansion will now be funded internally from cash flow rather than by capital.

The company today posted a half-year loss of $NZ21.08 million, an improvement of more than 50% on the same six months last year, as revenue jumped 37% to $NZ187.8 million.

The company had a positive EBITDA (earnings before interest, tax, depreciation and amortisation) for the first time — $5.4 million compared to loss of $25.9 million in the same six months last year.

“Following cash flow break-even, it is intended that surplus cash flow will be reinvested, subject to investment criteria, to drive long term value,” says Xero founder and CEO Rod Drury.

“Our team’s disciplined execution of our global growth strategy is delivering scale and we’re excited to enter this new phase of self sustainable growth.

“We’re still in the early stages of delivering cloud services to the many millions of small businesses around the world and believe we are well positioned to continue growing for many years to come.”

Here’s Xero’s journey to being earnings positive:

Source: Xero

Xero at the end of September had almost 1.2 million subscribers after hitting the magic 1 million number earlier this year.

The company also announced it is consolidating its stock exchange listing to the ASX and closing on New Zealand’s NZX.

“Xero is an ambitious New Zealand company. We will remain headquartered in Wellington and domiciled in New Zealand,” says Drury.

“While more than half of Xero’s people live and work in New Zealand, 80% of our revenue now comes from outside New Zealand. Our strategy is to drive further growth in markets like UK, North America and Southeast Asia.

“As Xero continues to grow, gaining enhanced access to deeper capital markets, increased liquidity and a broader base of potential investors is critical to fulfilling our ambition to be the leading global small business platform serving millions of customers.”

However, Xero has established a $100 million stand-by debt facility with the BNZ and ANZ banks. “There are no current plans to draw down on the facility,” the company said.

First half numbers at a glance: