Xero Announces Fiscal 2015 Results

WELLINGTON, NEW ZEALAND--(Marketwired - Apr 23, 2015) - Xero Limited (NZSE: XRO) (ASX: XRO) continued to deliver exceptional growth for the year ended 31 March 2015, recording operating revenue of $123.9m, up 77% from $70.1m in FY14. (Note: all currency is in New Zealand dollars and results are unaudited)

Paying customers grew to 475,000 at 31 March 2015, up 67%, and subscription revenue grew 81% to $120.9m. Xero's recurring revenue model means that it commences its 2016 financial year strongly with $159.3m in annualised committed monthly revenue, a 71% increase on the same time last year.

The Company will continue to invest to fuel growth and scale while maintaining its focus on building a high margin business model. The business maintained a strong cash position with $268.9m of cash at 31 March 2015 to continue to invest in creating long-term shareholder value.

Highlights of the financial year ended 31 March 2015 include:

Revenue

• Subscription revenue of $120.9m, up 81% from $66.9m in FY14
• Constant currency subscription revenue of $122.5m, up 83% compared to FY14
• Operating revenue of $123.9m, up 77% compared with FY14
• Annualised committed monthly revenue (ACMR) of $159.3m, a 71% increase on FY14

Operating Loss

• The net loss after tax for FY15 increased 96% to $69.5m, increasing to 56% of operating revenue from 51% from FY14, reflecting the investment in product development, and sales and marketing

Balance Sheet and Cash Flow

• Cash of $268.9m available to fund future growth and expansion
• During FY15, the Company used $88.4m of cash and cash equivalents in operating and investing activities compared to $48.4m during FY14
• Xero raised $147.2m in March 2015

Business Highlights

• Paying customers increased to 475,000 at 31 March 2015, an increase of 191,000 or 67% compared to 284,000 last year at 31 March 2014
• Xero added 403 employees, and now has 1,161 staff globally to support customer growth across all markets and to scale product development. Xero anticipates a slower rate of employee growth in FY16.

Regional Breakdown
		Year ended 31 March
Subscription revenue		2015		2014		% Change
New Zealand		32.6		23.2		41	%
Australia		56.5		27.7		104	%
United Kingdom		19.3		10.1		91	%
North America		7.7		3.3		133	%
Rest of World		4.8		2.6		85	%
Total		120.9		66.9		81	%

		Year ended 31 March
Paying customers		2015		2014		% Change
New Zealand		138,000		102,000		35	%
Australia		203,000		109,000		86	%
United Kingdom		83,000		47,000		77	%
North America		35,000		18,000		94	%
Rest of World		16,000		8,000		100	%
Total		475,000		284,000		67	%

Comment from CEO, Rod Drury
"We're delighted with our achievements this year. We focused on adding and integrating 400 talented people to our team for critical mass around the globe. We're extremely proud to have done that while continuing to drive strong revenue and customer growth across all markets. We have emerged as the cloud accounting leader in three countries and are seeing positive momentum in the U.S. market," said Rod Drury, CEO, Xero.

"Our platform now provides the most comprehensive small business accounting experience for customers, winning against desktop solutions while delivering the benefit of running a business anywhere, anytime, from any device. We have delivered payroll and inventory across all markets, and we will continue to add value to small businesses, accountants and bookkeepers through continued innovation. We are very excited about FY16 and expect strong growth to continue in all our core markets for the foreseeable future."

FY15 Commentary
Xero continues exceptional growth as the leader in cloud accounting in New Zealand, Australia and the United Kingdom, with annualised subscriptions of $39.5m, $74.2m and $25.9m respectively.

Strong growth is expected to continue in these markets, and Xero has focused on building infrastructure to support its expansion in the U.S. market. The U.S. remains a significant and addressable opportunity with the majority of small businesses unserved by cloud accounting software. Xero is well positioned to meet this need through its complete small business accounting solution, purpose built for the Cloud and mobile devices.

During the second half of the year the U.S. management team formed, led by U.S. President Russ Fujioka. The focus was on ensuring a solid foundation for North America to enable it to scale, and during the second six months customer growth was 300% greater than the first six months.

Xero continued to build its Global Leadership Team appointing Andy Lark as Chief Marketing Officer, Angus Norton as Chief Product Officer, and San Francisco-based Graham Smith was appointed to the Board as a non-Executive Director.

An additional $147.2m of capital was raised in March 2015 from Accel Partners and existing investor Matrix Capital Management, positioning Xero strongly with $269m of cash.

Investor calendar (NZT)
24 April 2015, 9am NZT - Investor conference call
21 May 2015 - Annual Report release
22 July 2015 - Annual General Meeting (Wellington, New Zealand)
19 November 2015 - Half Year Interim Report release

XERO Limited
Condensed Consolidated Statements of Financial Position
(Unaudited, in thousands)
		As at 31 March
		2015			2014
Assets
Current assets
Cash and cash equivalents		58,866			14,886
Short-term deposits		210,000			195,000
Trade and other receivables		21,499			14,374
Short-term derivative assets		3,151			-
Total current assets		293,516			224,260
Non-current assets
Property, plant and equipment		16,631			9,856
Intangible assets		64,057			34,828
Deferred tax asset		1,427			486
Other receivables		1,712			2,371
Total non-current assets		83,827			47,541
Total assets		377,343			271,801
Liabilities
Current liabilities
Trade and other payables		14,904			7,105
Employee entitlements		14,040			9,026
Income tax payable		2,218			732
Short-term derivative liabilities		130			-
Total current liabilities		31,292			16,863
Non-current liabilities
Deferred tax liability		398			-
Total non-current liabilities		398			-
Total liabilities		31,690			16,863
Equity
Share capital		492,173			336,308
Share based payment reserve		7,537			4,682
Accumulated losses		(155,474	)		(85,940	)
Foreign currency translation reserve		(758	)		(112	)
Cash flow hedge reserve		2,175			-
Total equity		345,653			254,938
Total liabilities and shareholders equity		377,343			271,801

XERO Limited
Condensed Consolidated Income Statements
(Unaudited, in thousands, except per share data)
		Year ended 31 March
		2015			2014
Subscription revenue		120,928			66,853
Other operating revenue		2,922			3,238
Total operating revenue		123,850			70,091
Other income		3,369			1,383
Total revenue and other income		127,219			71,474
Cost of revenues		37,403			24,516
Gross profit		89,816			46,958
Operating expenses:
Sales and marketing		93,478			55,105
Product design and development		48,959			18,409
General and administration		24,548			11,716
Total operating expenses		166,985			85,230
Operating deficit		(77,169	)		(38,272	)
Interest income		7,713			5,062
Interest expense		(25	)		-
Other gains/(losses)		2,025			(690	)
Net loss before tax		(67,456	)		(33,900	)
Income tax expense		(2,078	)		(808	)
Net loss from continuing operations		(69,534	)		(34,708	)
Net loss from discontinued operations		-			(838	)
Net loss after tax for the period attributable to the shareholders of the Company		(69,534	)		(35,546	)
Earnings per share
Basic and diluted loss per share		($0.55	)		($0.29	)
Amounts include non cash share-based compensation expense as follows:		Year ended 31 March
		2015			2014
Cost of revenues		594			554
Sales and marketing		3,517			2,088
Product design and development		4,478			1,683
General and administration		3,402			778
Total share-based compensation expense		11,991			5,103

XERO Limited
Condensed Consolidated Statements of Cash flows
(Unaudited, in thousands)
		Year ended 31 March
		2015			2014
Operating activities
Cash was provided from/(applied to):
Receipts from customers		119,566			67,136
Other income		2,580			1,086
Interest received		7,950			2,613
Payments to suppliers and employees		(166,853	)		(91,175	)
Income tax paid		(1,866	)		(679	)
Net cash flows from operating activities		(38,623	)		(21,019	)
Investing activities
Cash was applied to:
Purchase of property, plant and equipment		(10,315	)		(5,150	)
Capitalised development costs		(32,994	)		(21,540	)
Business acquisitions		(5,349	)		-
Intangible assets		(174	)		(63	)
Rental bonds		(926	)		(627	)
Net cash flows from investing activities		(49,758	)		(27,380	)
Financing activities
Cash was provided from/(applied to):
Exercising of share options		709			492
Share issue		149,290			180,000
Cost of share issue		(2,845	)		(438	)
Payments for short-term deposits		(418,000	)		(256,300	)
Proceeds from short-term deposits		403,000			133,425
Net cash flows from financing activities		132,154			57,179
Net increase in cash and cash equivalents held		43,773			8,780
Foreign currency translation adjustment		207			(13	)
Cash and cash equivalents at the beginning of the year		14,886			6,119
Cash and cash equivalents at the end of the year		58,866			14,886

About Xero
Xero is beautiful, easy-to-use online accounting software for small businesses and their advisors. The company has 475,000 paying customers in more than 180 countries. Xero seamlessly integrates with over 400 third-party tools, and was recently ranked No. 1 by Forbes as the World's Most Innovative Growth Company.