Xero inks US partnership with H&R Block

Analysts who said Xero could find the going tough in the US might have to think again.
Written by Rob O'Neill, Contributor

New Zealand-based cloud accounting software company Xero has announced a strategic alliance in the US with New York Stock Exchange-listed H&R Block, the world’s largest consumer tax services provider.

Xero has told the New Zealand Stock Exchange it will become the preferred core small business online accounting solution in H&R Block’s Small Business suite of services in the US. 

"For Xero, partnering with the well-known tax company gives it the opportunity to increase its brand awareness in the US and expand its marketing and sales channel to more small businesses throughout the country," xero said in a statement.

Xero's share price has been under pressure in recent weeks due to an overall slide in tech stocks globally but also due to some analysts downgrading the company in the belief it would struggle to gain traction in the competitive uS market.

One such analyst, Woodward Partners' Nick Lewis, forecast Xero's shares at below NZ$20 if it failed to penetrate the US market.

Lewis told New Zealand news site Stuff there was no indication Xero was gaining "serious, tangible traction" there in competition with "monster" competitor Intuit.

"H&R Block is one of the biggest accounting brands in the US. They are Intuit's biggest competitor. So I think it's positive," Xero founder Rod Drury told ZDNet.

"All these relationships take time. We have huge amount of education and process work to do over the next year but [this] positions us very strongly in the medium term."

Xero share, which  peaked close to NZ$45 in March, were trading at $30 at market close last night.

Last month Xero inked a similar alliance with KPMG in the UK. 

Earlier this month, Xero reported operating revenue of NZ$70.1 million for the year ended 31 March 2014 and a net loss after tax of around NZ$35 million.

Operating revenue was up 83% up from last year’s NZ$38.4 million. The net loss after tax of approximately NZ$35 million, compares with NZ$14.4 million recorded last year, after Xero expanded its headcount by 376 to a total of 758 by the end of 2014.

The company said it has NZ$210 million of cash to fund growth.

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