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Xero posts first annual EBITDA positive result

10 May 2018

Xero today reported its full-year earnings to March 312018, delivering its first positive annual EBITDA of AU$26 million.

Xero has continued to grow in FY18, adding 351,000 subscribers, increasing revenue by 38%, improving operating cash flows by AU$45.6 million, increasing EBITDA by AU$54.6 million and growing LTV by AU$990 million to surpass AU$3.2 billion in total LTV.

Xero is delivering on its consistent strategy to drive global growth, while improving financial outcomes through operating efficiencies.

Xero improved operating and investing cash flow margins from 71% to 9% over three years and grew revenue at a compound annual growth rate (CAGR) of 49% over the same period.

Xero’s recurring revenue and ARPU metrics have been updated to include other recurring platform revenues such as transactional services, and other partner and small business products (AMRR has replaced Annualised committed monthly revenue (ACMR)).

In FY18, core accounting product revenues grew 37% while other platform revenues (currently representing 3% of total group revenues) grew at 94%.

Xero chief executive Steve Vamos says, “Xero has delivered another impressive full-year result driven by subscriber and revenue growth with excellent operating discipline, reflecting the strength of our value proposition and business model.”

“We are well poised to leverage Xero’s international positions as we continue to build a diversified growth profile,” he says.

“The Xero team is focussed on delivering a scalable product and customer service experience as we expand further into new and existing markets.”

Xero chief operating and financial officer, Sankar Narayan says, “This has been a landmark year for Xero, reaching several significant milestones while driving strong subscriber and revenue growth.

These include S&P/ASX 100 index inclusion, its first annual positive EBITDA, first positive operating cash flows for the full-year, and establishing access to debt capital.”

Global small business platform

Working with accountants and bookkeepers, Xero is establishing multiple opportunities for growth.

This financial year, Xero released a significant number of product updates and new features, including initiatives to service small businesses that go beyond accounting products, such as projects, expenses and financial web partnerships.

Vamos says, “Xero is a catalyst in the changing relationships between financial institutions, financial advisory services, accountants, and small businesses.

“In the large, under-served small business market, there is a vast growth opportunity that we are addressing as we continue to expand the Xero product offering.”

Outlook

Xero will continue to focus on growing its global small business platform.

Cash outflow in FY19 is forecast to reduce from FY18.

Xero is managing the business to cash flow break-even within its current cash balance (without drawing on its debt facility) through operational efficiencies.

Following cash flow break-even, it is intended that surplus cash flow will be reinvested, subject to investment criteria, to drive long-term shareholder value.

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