Xero plans to take US by storm

By Linda Hall

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BAY BUSINESSMAN: Xero boss Rod Drury says America's accounting software provider Intuit is "spooked" by the arrival of Xero. PHOTO/FILE HBT132646-08
BAY BUSINESSMAN: Xero boss Rod Drury says America's accounting software provider Intuit is "spooked" by the arrival of Xero. PHOTO/FILE HBT132646-08

Cloud-based accounting software company Xero says a 47 per cent increase in quarterly cash burn is on budget as it hires workers and takes on rival Intuit in the US market.

Xero's net operating and investing cash outflow rose to $17.3 million in the quarter ended June 30, from $11.8 million three months earlier, the company said.

Staff costs rose to $19.1 million from $12 million and were up 88 per cent from the June quarter last year. Cash holdings fell 8 per cent to $192.7 million.

The company doubled staff numbers to 758 in the 12 months ended March 31 and has continued to hire workers as it attempts to scale up.

The company told shareholders at their annual meeting last month that it is considering a listing in the US after it reaches annual revenues of US$100 million ($177.6 million), expected in this financial year, and has tapped former Microsoft chief financial officer Chris Liddell as chairman.

"From our perspective, there are no surprises," said Darryl Robinson, Xero's general manager group finance.

"The quarterly cashflow results are in line with our targets and are reflective of our growth plans."

The shares fell 2.5 per cent to $24.77 and have shed 21 per cent this year.

That's still above the $18.15 a share that US investors, including Matrix Capital Management and the Peter Thiel-backed Valar Ventures, paid in a capital-raising last October that gave Xero a $180 million cash infusion.

Sales were $23.5 million in the June quarter, up from $20.4 million three months earlier and up 81 per cent from the same period last year.

Havelock North-based chief executive Rod Drury told shareholders last month that America's incumbent accounting software provider Intuit is "spooked" by the arrival of Xero.

"Intuit's a formidable, large company in the US, but it's important to recognise that of something like 30 or 40 million small, medium businesses in the US, Intuit's customer base is five million," Drury said.

- Hawkes Bay Today

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