Xero profit remains positive as subscribers tip 2 million

Company turns around 1H18 loss to post NZ$1.3 million in after-tax profit for the first-half of 2019.

Xero has remained in the black for a second consecutive half, reporting that net profit after tax reached NZ$1.3 million. Year on year, the result is up nearly NZ$30 million compared to the six months to 30 September 2018, which recorded a NZ$19.6 million loss.  

The cloud accounting firm also indicated earnings before interest, tax, depreciation, and amortisation excluding impairments hit nearly NZ$66 million, almost double the NZ$34.5 million that was reported in the previous period.

Operating revenue, meanwhile, was up 32% year on year, reaching close to NZ$339 million.

The company also announced it tipped passed the 2 million global subscribers mark, with global subscribers increasing by 478,000 during the period.

Concurrently, total subscriber lifetime value grew by 37% to NZ$5.4 billion, with more than NZ$1 billion added during this half-year period.

"While it took more than a decade to add Xero's first million subscribers, it took just two and a half years to add the next million, demonstrating the pace of Xero's adoption across a number of markets," Xero told shareholders on Thursday.

On a region-by-region basis, the United Kingdom saw the most significant growth in terms of subscriber and revenue numbers. Subscribers grew by 51% compared to the same period last year to 536,000, while revenue also grew 51%.

The company attributed the growth to its ongoing investment in the market, which was marked by the opening of a third office in the country.

Meanwhile in Australia, subscribers grew 28% compared to the same period last year, which saw the half-year end with 840,000 subscribers, while revenue went up 26%. Xero said the implementation of the Australia Taxation Office's single touch payroll initiative has contributed to the demand for cloud accounting in the market.

For New Zealand, subscriber numbers saw a 13% increase compared to the last year to 367,000, with revenue rising by 22%.

"Favourable average revenue per user (ARPU) trends were driven by a greater emphasis on additional platform solutions including Xero Payroll which benefited from the introduction of Payday filing by Inland Revenue on 1 April 2019 and the adoption by existing customers of higher value and function subscriptions," the company said.

North American subscriber numbers lifted by 21% to 215,000, while revenue increased by 34%.

Rest of the world markets now have 99,000 subscribers, which was led mainly by South Africa, Hong Kong, and Singapore.

Xero also upped its head count during the six months to just over 2,700 staff.

On new hires, the New Zealand-based company announced during the period the appointment of David Thodey as its latest non-executive board member.

During the six months, Xero also bolstered its machine learning capabilities for document processing and extraction using technology from Hubdoc, a company that the cloud accounting firm acquired last year for $70 million.

"We continue to invest in Xero's platform and made significant progress on our strategy in the first six months of our 2020 financial year," Xero said.

"We have been investing heavily in technologies to support our platform, which will help Xero rapidly scale so we can deliver customer value and meet our growth ambitions."

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