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Xero Limited’s UK Business is Taking Flight

Australia's leading accounting software business Xero Limited (ASX:XRO) released its half-year report today showing strong subscriber growth across all regions. 

Australia’s leading accounting software business Xero Limited (ASX: XRO) released its half-year report today showing subscriber growth across all regions.

In its public filing on Thursday, Xero said its Australia and New Zealand business now boasts 981,000 subscribers, up 24% year over year.

However, it was abroad in the UK and USA where Xero posted more growth. Xero reported adding 40% more users in the UK, taking the total to 355,000, while its North American user base grew 62% to 178,000.

“Xero is very well positioned to take advantage of organic growth opportunities and following the completion in October of our US$300 million convertible notes issue, we have the financial flexibility to target complementary acquisitions and investments,” CEO Steve Vamos said.

The Wellington-based company’s revenue came in at $256.5 million, up 37% year over year, thanks in part to an increase in revenue per user, Vamos said.

Xero’s half-year results demonstrate strong top and bottom line results with significant improvements in cash flow margins and average revenue per user,” he noted. Adding, “We remain focussed on disciplined execution of our strategy to drive growth while improving financial outcomes through operating efficiencies.”

During the period Xero acquired Hubdoc, a software company which allows Xero’s software to ‘read’ bank statements. It’s one of the many ‘apps’ built on top of the Xero ecosystem.

“Our acquisition of Hubdoc delivered a key element in Xero’s code-free accounting strategy, enabling small businesses and their advisors to focus less on paperwork and more on growing their business.”

In the United States, a key target market for the company where rival Intuit Inc (NASDAQ: INTU) dominates, Xero formed a strategic alliance with San Francisco’s Gusto Inc to offer payroll across 50 states.

“Likewise Xero’s strategic alliance with leading US payroll provider Gusto is an important step in the implementation of our US strategy,” Vamos said.

Looking ahead, the company said it remains on track to reach cash flow break-even in-line with prior guidance.

Xero shares were trading 1.6% higher on Thursday in the final hour of trading.

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