XERO FPO NZ(ASX:XRO) reported that its overall subscribers base in Australia and New Zealand reached 400,000 subscribers, surging by 44% against 277,000 subscribers as of September 2014. New Zealand had 150,000 subscribers while Australia would have 250,000 subscribers by next week. Xero now has around 540,000 customers across the world. Xero’s Touch app downloads also witnessed outstanding increase of 82% on a year over year basis to 470,000.
 
Fiscal 2015 performance highlights

• Xero also generated a solid operating revenue growth of 77% to $123.9 million in the 2015 fiscal year as compared $70.1 million in FY14. The Paying customers rose 67% yoy to 475,000 during the period. Meanwhile, the constant currency subscription revenues surged 83% yoy to $122.5 million in FY15. The annualizedcommitted monthly revenue (ACMR) soared 71% yoy to $159.3 million in FY15. However, XRO’s net loss after tax increased by 96% yoy to $69.5 million on the back of rise in product development and sales and marketing initiatives. XRO has been launching over 1,000 product updatesin its core online accounting solution over the last two years wherein around 600 updates were done during 2015. As a result, the firm also increased its staff by 403 to 1,161 employees. Australia and New Zealand subscription revenues increased by 104% and 41% to $56.5 million and $32.6 million respectively in FY15, as compared to the last financial year. Meanwhile, the Australia and New Zealand paying customers rose by 86% yoy and 35% yoy to 203,000 and 138,000 respectively. United Kingdom’s subscription revenues and paying customers improved by 91% yoy and 77% yoy for 2015 fiscal year. 

        
       ACMR breakup by region (Source: Company Reports)

• Despite making investments to drive growth in future, Xero was able to maintain a strong balance sheet and had $268.9 million of cash flow. During FY15, the Company used $88.4 million of cash and cash equivalents in operating and investing activities compared to $48.4 million during FY14. The group raised over $147.2 million during March from Accel Partners and Matrix Capital Management to boost its cash for funding its development activities. XRO had used over $88.4 million of cash and cash equivalents in operating and investing activities during 2015 financial year against $48.4 million in 2014 fiscal year.
   
  Outlook
• US remains the main target market for Xero especially to small businesses who needs cloud accounting software. Accordingly, the group’s North America’s subscription revenues and paying customers reported a significant performance, surging 133% yoy and 94% yoy respectively in the 2015 fiscal year. Accordingly, the U.S customers showed an outstanding growth of 300% during the second half of the year. Moreover, Forbes awarded Xero as the Most Innovative Growth Company for the second consecutive year, while IDC recognized Xero as the fastest growing company in the payroll accounting area which represents 74.7% year over year revenue growth in 2014. IDC also recognized XRO as fastest growing financial applications vendor, as it witnessed 80.3% year over year revenue growth in 2014

       
       Long Term Margin (Source - Company Reports)

• 
   The group has partnered with major brands like Apple, Google, Microsoft, Avalara, Bill.com, Mindbody, Shopify and Square. XRO is continuously making investments to improve its application programming interface to further develop its ecosystem as well as achieve strong integrations with its strategic partners. Xero is also among selected SaaS companies across the world(less than 7% as per company reports), which can scale its user base to more than 10,000 subscribers. Meanwhile, the group forecasts its subscription revenue to be more than NZ$200 million for 2016 fiscal year (according to June 2015 FX rates). Earlier, Xero estimated that its recurring revenue model which is implemented in 2016, would generate a year over year growth of 71% annualized committed monthly revenue of $159.3 million in 2016 fiscal year.

       
       Sales Channels (Source - Company Reports)

• 
   The shares of XERO FPO NZ soared around 62.2% in the month of February, driven by the news of its capital raising. Although, these higher levels were sustained in the month of March, the stock has been declining from the last week of April and plunged over 20.2% in last three months. However, we believe that investors need to use the recent correction to enter in the stock, given its improving competitiveness, solid subscribers’ growth especially in the international markets and strong partnerships. Accordingly, we give a “BUY” recommendation to the shares of XRO at the current price of $14.28.

---

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people.Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation.Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product.The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
Copyright
Copyright © 2014 Kalkine Pty Ltd ABN 34 154 808 312. No part of this website, or its content, may be reproduced in any form without the prior consent of Kalkine Pty Ltd.
Kalkine is a trading name of Kalkine Pty Ltd ABN 34 154 808 312, which holds Australian Financial Services Licence No. 425376.


 

•  
•  
•