Xero has reported a wider net loss, but with its underlying profit increased by more than a third, beating the consensus analyst estimate, and big gains in users and revenue.
Shares jumped 6.4 per cent to A$100.04 in early trading.
Xero made a net loss of $113.5 million for theyear to March 31, from the prior year’s $9.1m net loss, as it took a $79m impairment on Planday - a maker of workforce management software acquired for €155.7m ($259m) in 2021.
The firm also booked $34.7m in one-off restructuring costs.
It was the second big write-off on an acquisition as new CEO Sukhinder Singh Cassidy refocuses on Xero’s core business.
On May 9, as 800 layoffs (15 per cent of Xero’s workforce) were announced, the firm took a $40m impairment on Waddle, the invoice-lending business it bought in 2020 in a deal worth up to A$80m. That came on top of a $25.9m write-down of Waddle with its half-year result.
First-half ebitda fell 26 per cent to $158.4m.
Adjusted ebitda - taking out restructuring costs - improved 45 per cent to $301.7m, ahead of the consensus of $271m. The result was buoyed by gains in the UK.
Xero’s operating expense to operating revenue ratio for the full year was 80.7 per cent (excluding restructuring costs of $34.7m), above the analyst consensus of 75 per cent.
Total subscriber numbers increased 14 per cent to 3.74m with 440,000 net additions (down from the net 530,000 subs added in FY2022).
And revenue jumped 28 per cent to $1.40 billion (in line with the consensus expectation) on the back of the rise in total subs, plus an increase in average monthly revenue per user from $31.36 to $34.61.
Australia saw the strongest growth as subscribers increased by 220,000 or 17 per cent to 1.57 million, followed by the UK where sub numbers jumped 14 per cent to 440,000.
New Xero CEO Sukhinder Singh Cassidy. Photo / Supplied
NZ had the weakest growth of Xero’s main territories, but still saw total subscriber numbers increase by 55,000 to 567,000.
The only hard guidance number provided for FY2024 was that Xero is targeting an expense-to-sales ratio of 75 per cent.
Xero finished the year with $404.2m in cash from the year-ago $230.6m.
On a conference call with analysts, CFO Kirsty Godrey-Billy offered only limited details on the 800 layoffs. The CFO said product, technology, sales and marketing roles had been cut, with Xero “over-indexing” toward senior roles, which she said would speed decision-making.
Analysts have speculated there could be disproportionately deep cuts in Xero’s under-performing North American operation. On the conference call, Singh Cassidy said she was “not satisfied” with the size of Xero’s customer base in the region and would undertake a strategic review. She this would be a “measured” process that would take until November.
Xero shares, which were at A$78.85 ahead of the cuts announced on March 9, closed Wednesday at A$94.10.
Despite its recent lift, the stock is still well off the A$154.47 it hit in November 2021 at the height of the pandemic cloud boom.
