Xero is going for $1 billion in revenue ahead of profits

Xero’s Melbourne office. Photo: supplied.

Xero, the cloud accountancy platform which started in New Zealand and is now building an international business, isn’t in a hurry to get to profit.

Rod Drury, the CEO, is more focused on getting the company’s revenue to $1 billion.

He’s about a quarter of the way there. Xero, in its full year results announced today, is hitting about $250 million a year when working on an annualised run rate.

“We’ve got $184 million in cash and investors want us to grow long term value,” he told Business Insider.

“By definition we’re going to make a loss.”

Xero today posted a 67% rise in full-year revenue to NZ$207 million and added more subscribers than in any other year to a total of 717,000.

However, profits are still distant with a 18% rise in losses to NZ$82.46 million for the year to March but the business is working on breaking even on cash flow. Cash usage in 2017 is forecast to reduce from 2016.

Source: Xero.

“We did what we said we would do which was to manage the cash flow and break even,” Drury says.

“And we’ve shown today that we’re not just a one trick pony with grow … we can still grow while managing costs.

“I think it positions xero really well as a high growth opportunity for investors but very well managed with a pathway to profitability.”

Drury won’t commit to to giving a firm timetable for profit and the $1 billion revenue goal.

“Soon, over the next few years,” he says.

“We’ve got plenty of cash and what we’ve said is that we will use less cash each and we are driving the business towards $1 billion of revenue.”

The cloud accountancy market is crowded with other players including MYOB, Reckon, Intuit and Sage.

But Drury doesn’t see them getting close.

“We don’t have a close follower, that’s what’s really exciting,” he says. “There’s really no-one else who has built a global accounting platform.”

Drury says it’s difficult to tell what the incumbents are doing because they don’t give all the numbers.

“But as far as we can tell we are now the market leader in Australia and New Zealand,” he says.

“We’re chasing really good revenue and I think we are outperforming our share of the global revenue.

“It has to be a single global platform that wins. We’re looking good.”

Over he last year, the Xero platform processed $1 trillion in transactions.

“That gives us some amazing data for us to derive insights into what’s actually happening inside small business,” Drury says.

Xero is using that data to study how small business work and using that to inform product development.

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