Xero tops $100m revenue mark

Xero chief executive and founder Rod Drury during a presentation. Photo / Mark Mitchell

Online accounting software firm, Xero, is "well on track" to hit its long-term performance targets according to chief executive Rod Drury, with the company hitting the $100 million annualised revenue mark for the first time earlier this month.

Drury said the revenue was a result of increased focus on global markets such as Australia and the UK, where their customer base had been growing steadily. He also felt the revenue was validation that the company was on the right track.

"It's a really fantastic result for us, we're pretty happy with how fast we've managed to get here as well. I mean if we can get to $100 million, what's to stop us becoming a billion dollar company eventually?" Drury quipped.

The company's biggest market is in Australia, with more than 120,000 customers. Drury describes the company as being completely global, rather than New Zealand based, with customers in more than 100 countries world-wide, and less than 30 per cent of annualised subscription revenue coming from New Zealand.

Forsyth Barr analyst, Blair Galpin, said the revenue figure was expected, based on the company's full year result of $70.1 million in March. He said that while the company continued to grow, achieving profitability was less important as an indicator of company success, but that their next move into the US would be a significant point for the company.

"The American market is where the key focus is. Let's not underestimate the size of the Aussie and UK market, you can build a good business out of those two. Really though, the valuation and the story around Xero is underpinned on its longer term play in the US market and how well it does there." Galpin said.

Drury said breaking even was an important target for the company but reinvesting in company growth was still their key focus. Galpin noted that while achieving profitability was important, the company had a little bit of leeway.

"Profit is probably less important for the company at this stage, it's more about keeping sales growth up, that's really the target that everyone's watching, and they're willing to forgive the loss in the interim as long as they keep hitting results targets. They have quite a bit of money in the bank too which is always good." Galpin said.

Xero entered the US market 18 months ago and according to Drury, they already have more than 18,000 US customers, with further growth and sales team expansion a key focus point in the coming months.

"The US market is definitely where our focus is now. The UK, Australian and New Zealand markets are pretty stable but the US market is growing quite quickly and we need to be pushing that growth. So far we've seen pretty positive results though." Drury said.

Shares rose by 0.03 per cent this morning to $29.160.