SOURCE: Xero

Xero

April 23, 2015 20:24 ET

Xero Announces Fiscal 2015 Results

Grows Subscription Revenue 81% to $121m; Fast Growing SaaS Company Ends Year in Strong Cash Position

WELLINGTON, NEW ZEALAND--(Marketwired - Apr 23, 2015) - Xero Limited (NZSE: XRO) (ASX: XRO) continued to deliver exceptional growth for the year ended 31 March 2015, recording operating revenue of $123.9m, up 77% from $70.1m in FY14. (Note: all currency is in New Zealand dollars and results are unaudited)

Paying customers grew to 475,000 at 31 March 2015, up 67%, and subscription revenue grew 81% to $120.9m. Xero's recurring revenue model means that it commences its 2016 financial year strongly with $159.3m in annualised committed monthly revenue, a 71% increase on the same time last year.

The Company will continue to invest to fuel growth and scale while maintaining its focus on building a high margin business model. The business maintained a strong cash position with $268.9m of cash at 31 March 2015 to continue to invest in creating long-term shareholder value.

Highlights of the financial year ended 31 March 2015 include:

Revenue

  • Subscription revenue of $120.9m, up 81% from $66.9m in FY14
  • Constant currency subscription revenue of $122.5m, up 83% compared to FY14
  • Operating revenue of $123.9m, up 77% compared with FY14
  • Annualised committed monthly revenue (ACMR) of $159.3m, a 71% increase on FY14

Operating Loss

  • The net loss after tax for FY15 increased 96% to $69.5m, increasing to 56% of operating revenue from 51% from FY14, reflecting the investment in product development, and sales and marketing

Balance Sheet and Cash Flow

  • Cash of $268.9m available to fund future growth and expansion
  • During FY15, the Company used $88.4m of cash and cash equivalents in operating and investing activities compared to $48.4m during FY14
  • Xero raised $147.2m in March 2015

Business Highlights

  • Paying customers increased to 475,000 at 31 March 2015, an increase of 191,000 or 67% compared to 284,000 last year at 31 March 2014
  • Xero added 403 employees, and now has 1,161 staff globally to support customer growth across all markets and to scale product development. Xero anticipates a slower rate of employee growth in FY16.
   
Regional Breakdown  
    Year ended 31 March      
Subscription revenue   2015   2014   % Change  
New Zealand   32.6   23.2   41 %
Australia   56.5   27.7   104 %
United Kingdom   19.3   10.1   91 %
North America   7.7   3.3   133 %
Rest of World   4.8   2.6   85 %
Total   120.9   66.9   81 %
               
    Year ended 31 March      
Paying customers   2015   2014   % Change  
New Zealand   138,000   102,000   35 %
Australia   203,000   109,000   86 %
United Kingdom   83,000   47,000   77 %
North America   35,000   18,000   94 %
Rest of World   16,000   8,000   100 %
Total   475,000   284,000   67 %
               

Comment from CEO, Rod Drury
"We're delighted with our achievements this year. We focused on adding and integrating 400 talented people to our team for critical mass around the globe. We're extremely proud to have done that while continuing to drive strong revenue and customer growth across all markets. We have emerged as the cloud accounting leader in three countries and are seeing positive momentum in the U.S. market," said Rod Drury, CEO, Xero.

"Our platform now provides the most comprehensive small business accounting experience for customers, winning against desktop solutions while delivering the benefit of running a business anywhere, anytime, from any device. We have delivered payroll and inventory across all markets, and we will continue to add value to small businesses, accountants and bookkeepers through continued innovation. We are very excited about FY16 and expect strong growth to continue in all our core markets for the foreseeable future."

FY15 Commentary
Xero continues exceptional growth as the leader in cloud accounting in New Zealand, Australia and the United Kingdom, with annualised subscriptions of $39.5m, $74.2m and $25.9m respectively.

Strong growth is expected to continue in these markets, and Xero has focused on building infrastructure to support its expansion in the U.S. market. The U.S. remains a significant and addressable opportunity with the majority of small businesses unserved by cloud accounting software. Xero is well positioned to meet this need through its complete small business accounting solution, purpose built for the Cloud and mobile devices.

During the second half of the year the U.S. management team formed, led by U.S. President Russ Fujioka. The focus was on ensuring a solid foundation for North America to enable it to scale, and during the second six months customer growth was 300% greater than the first six months.

Xero continued to build its Global Leadership Team appointing Andy Lark as Chief Marketing Officer, Angus Norton as Chief Product Officer, and San Francisco-based Graham Smith was appointed to the Board as a non-Executive Director.

An additional $147.2m of capital was raised in March 2015 from Accel Partners and existing investor Matrix Capital Management, positioning Xero strongly with $269m of cash.

Investor calendar (NZT)
24 April 2015, 9am NZT - Investor conference call
21 May 2015 - Annual Report release
22 July 2015 - Annual General Meeting (Wellington, New Zealand)
19 November 2015 - Half Year Interim Report release

             
             
XERO Limited  
Condensed Consolidated Statements of Financial Position  
(Unaudited, in thousands)  
             
    As at 31 March  
    2015     2014  
Assets            
Current assets            
Cash and cash equivalents   58,866     14,886  
Short-term deposits   210,000     195,000  
Trade and other receivables   21,499     14,374  
Short-term derivative assets   3,151     -  
Total current assets   293,516     224,260  
             
Non-current assets            
Property, plant and equipment   16,631     9,856  
Intangible assets   64,057     34,828  
Deferred tax asset   1,427     486  
Other receivables   1,712     2,371  
Total non-current assets   83,827     47,541  
Total assets   377,343     271,801  
             
Liabilities            
Current liabilities            
Trade and other payables   14,904     7,105  
Employee entitlements   14,040     9,026  
Income tax payable   2,218     732  
Short-term derivative liabilities   130     -  
Total current liabilities   31,292     16,863  
             
Non-current liabilities            
Deferred tax liability   398     -  
Total non-current liabilities   398     -  
Total liabilities   31,690     16,863  
             
Equity            
Share capital   492,173     336,308  
Share based payment reserve   7,537     4,682  
Accumulated losses   (155,474 )   (85,940 )
Foreign currency translation reserve   (758 )   (112 )
Cash flow hedge reserve   2,175     -  
Total equity   345,653     254,938  
Total liabilities and shareholders equity   377,343     271,801  
             
   
XERO Limited  
Condensed Consolidated Income Statements  
(Unaudited, in thousands, except per share data)  
             
    Year ended 31 March  
    2015     2014  
             
Subscription revenue   120,928     66,853  
Other operating revenue   2,922     3,238  
Total operating revenue   123,850     70,091  
Other income   3,369     1,383  
Total revenue and other income   127,219     71,474  
             
Cost of revenues   37,403     24,516  
Gross profit   89,816     46,958  
             
Operating expenses:            
Sales and marketing   93,478     55,105  
Product design and development   48,959     18,409  
General and administration   24,548     11,716  
Total operating expenses   166,985     85,230  
Operating deficit   (77,169 )   (38,272 )
             
Interest income   7,713     5,062  
Interest expense   (25 )   -  
Other gains/(losses)   2,025     (690 )
Net loss before tax   (67,456 )   (33,900 )
Income tax expense   (2,078 )   (808 )
Net loss from continuing operations   (69,534 )   (34,708 )
Net loss from discontinued operations   -     (838 )
Net loss after tax for the period attributable to the shareholders of the Company   (69,534 )   (35,546 )
             
Earnings per share            
Basic and diluted loss per share   ($0.55 )   ($0.29 )
             
             
Amounts include non cash share-based compensation expense as follows:   Year ended 31 March  
    2015     2014  
Cost of revenues   594     554  
Sales and marketing   3,517     2,088  
Product design and development   4,478     1,683  
General and administration   3,402     778  
Total share-based compensation expense   11,991     5,103  
             
   
XERO Limited  
Condensed Consolidated Statements of Cash flows  
(Unaudited, in thousands)  
             
    Year ended 31 March  
    2015     2014  
Operating activities            
Cash was provided from/(applied to):            
Receipts from customers   119,566     67,136  
Other income   2,580     1,086  
Interest received   7,950     2,613  
Payments to suppliers and employees   (166,853 )   (91,175 )
Income tax paid   (1,866 )   (679 )
Net cash flows from operating activities   (38,623 )   (21,019 )
Investing activities            
Cash was applied to:            
Purchase of property, plant and equipment   (10,315 )   (5,150 )
Capitalised development costs   (32,994 )   (21,540 )
Business acquisitions   (5,349 )   -  
Intangible assets   (174 )   (63 )
Rental bonds   (926 )   (627 )
Net cash flows from investing activities   (49,758 )   (27,380 )
Financing activities            
Cash was provided from/(applied to):            
Exercising of share options   709     492  
Share issue   149,290     180,000  
Cost of share issue   (2,845 )   (438 )
Payments for short-term deposits   (418,000 )   (256,300 )
Proceeds from short-term deposits   403,000     133,425  
Net cash flows from financing activities   132,154     57,179  
Net increase in cash and cash equivalents held   43,773     8,780  
Foreign currency translation adjustment   207     (13 )
Cash and cash equivalents at the beginning of the year   14,886     6,119  
Cash and cash equivalents at the end of the year   58,866     14,886  
             
             

About Xero
Xero is beautiful, easy-to-use online accounting software for small businesses and their advisors. The company has 475,000 paying customers in more than 180 countries. Xero seamlessly integrates with over 400 third-party tools, and was recently ranked No. 1 by Forbes as the World's Most Innovative Growth Company.

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