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Xero sinks despite subscriber surge

Accounting software firm Xero sunk 13% after it reported its full-year earnings to 31 March 2021 on Thursday. The share price hit came despite a largely positive stream of news.

While COVID-19 impacted Xero’s top-line progress in the first six months of FY21, in the second half Xero delivered its strongest ever half-year subscriber numbers with 288,000 net additions; and total revenue increased by 18% to $848.8 million.


The numbers were due to continued momentum in Australia and New Zealand together with a notable recovery across Xero’s International markets. International net additions in the second half of 155,000 more than trebled compared to the first half of FY21. Over the full year, total global subscribers increased by 456,000 or 20% to reach 2.74 million.


Performance highlights FY21

  • Operating revenue increased by 18% to $848.8 million

  • Annualised monthly recurring revenue grew 17% to $963.6 million

  • Total subscribers increased by 20% to 2.74 million

  • Total subscriber lifetime value grew by 38% (37% in CC) to $7.65 billion

  • Free cash flow was $56.9 million, with total available liquid resources rising to $1.3 billion

  • EBITDA of $191.2 million, an increase of 39% compared to $137.7 million

  • Net profit of $19.8 million, an increase of $16.4 million


Outlook

Xero says it will continue to focus on growing its global small business platform and maintain a preference for reinvesting cash generated, subject to investment criteria and market conditions, to drive long-term shareholder value.


The company also notes that its planned acquisition of Planday is expected to contribute approximately three percentage points of additional operating revenue growth in FY22.


CEO Steve Vamos said: “The past year has brought home to many people in small business the need to understand in real-time their financial position and how it may change. The value and importance our customers place on their subscription and connection to the broader Xero community is increasing. Looking ahead we believe small business will be a major driver of economic recovery in a post-pandemic world. Small businesses make up more than 90% of businesses in the markets Xero operates in, and represent a significant contribution to economic activity, jobs, and the community."