New Zealand accounting software pioneer Xero expects to double global revenue to more than $200 million in the year to March 2016, based on current exchange rates, having taken eight years since listing on the NZX in June 2007 to reach its first $100 million.
However, it is no rush to fulfil its intention to list on the US stock exchange before the release of the results for the next year, chief executive Rod Drury told the annual meeting in Wellington. The company remained well-funded, with $269 million on hand from earlier capital-raisings, a key factor in Xero's capacity pursue rapid growth at the expense of less cashed-up competitors in the key Australian, US, and UK markets, he said.
Total billings in the last financial year were $121 million, up from $67 million in the year to March 2014.
Effervescent as ever, Drury had to ask the classically reserved audience of around 200 New Zealand shareholders to applaud for the company's achievements after a year in which the challenges of executing its growth strategy in the US market saw Xero stumble a couple of times, including two misfires on senior executive appointments.
Over the last year, the company's share price has fallen 26 percent, although it closed today up 2.3 percent at $17.95. The company is not projecting early profitability, seeking global scale in the belief that profits will be greater in the long run.
The new US chief executive Ross Fujioka, a US tech industry veteran of 30 years with a big background at Dell and Adobe, told a story of rapidly spiralling customer uptake, growing at 94 percent year on year growth rates, with 35,000 customers now in the US, half of whom have arrived in the last eight months, with nearly half signing up online.
Re-elected US-based company director Craig Elliott told the meeting that in his three years on the board, he had gone from having to explain what Xero is to having people ask him about Xero.
"Enthusiasm about the business in the US is growing by the day," he said.
New Zealand managing director Victoria Crone announced the company had just passed the 150,000 subscriber mark in New Zealand, with a 35 percent customer growth rate.
Over the course of 2015, the company calculated it had added some $450 million of future value to the business to close to $800 million, based on customer growth during the year and an extension in the calculated average life of a customer from 63 months to 83 months, and an average lifetime value per customer of $1,622. That was based on a total of 504,000 customers worldwide, 50,000 of them gained in less than 10 weeks, compared with the four years taken to gain the first 50,000.
In Australia, customers stand at 203,000 and are growing at an annual rate of 86 percent.
Drury said only 7 percent of all sofware as a service businesses ever achieved more than 10,000 users and Xero's scale and willingness to partner with providers of new solutions was creating a breeding ground for smaller software companies in New Zealand and internationally.
The business was now generating substantial "network effects", the new source of growth for online businesses after the social networks growth that drove the last 10 years, said Xero's chief marketing officer, Andy Lark. He pointed to organic growth already occurring in untargeted markets including South Africa, Indonesia and Brazil.
Drury told BusinessDesk that the drop in the New Zealand dollar was not a major factor in the $200 million turnover forecast because the company earned revenue in a variety of currencies, with $74.2 million of the company's annualised committed monthly revenue of $159.3 million generated in Australia and $39.5 million in New Zealand. That compares with North American monthly revenues of $12.5 million. The UK market, where the company is also making a concerted push, accounts for $25.9 million a month on current customer numbers.
"I wish we'd kept all the money we raised in US dollars, but that wasn't our treasury policy," he said, reflecting on a 25 percent fall in the New Zealand dollar exchange rate against the US dollar in the last year, during which the company raised a total of $147.2 million from two US private equity investment funds.
By Pattrick Smellie