Xero remains in the red as investments improve cash flow

Xero has reported an improvement in cash flow following a continued lift in customer sales, and as its continued investment in business activities pay off.

New Zealand-based cloud accounting company Xero continued to invest in activities and operations during the quarter ended December 31, 2015.

This resulted in the company reporting negative net operating cash flow of NZ$6.5 million, an improvement on the same quarter last year, when negative net operation cash flow was NZ$8.5 million.

Xero said the result was reflective of cash it spent on operating and investing activities, including staff costs, advertising and marketing, and other working capital.

Specifically, staff costs totalled NZ$32.4 million for the quarter, and NZ$94.4 million for the year to date; and advertising and marketing was NZ$14.1 million for the quarter, and NZ$39.2 million for the year to date.

It added that continued global customer and revenue growth, sustained operating efficiencies, and developing economies of scale in distribution channels and product development delivered improvement in net operating and investing cash flow.

The company, however, also noted the deterioration in the New Zealand dollar adversely impacted its operating and investment cash flow for the current quarter by NZ$1.8 million compared with the Q3 FY15, resulting in a year-on-year reduction of NZ$4.6 million, excluding the impact of foreign exchange.

Total sales for the current quarter lifted to NZ$52.6 million from the NZ$32.5 million that was reported during the same period last year.

The increase follows on from last November when Xero reported it boosted subscriber numbers by 60 percent during the half year ended September 30, 2015. At the time, it said it had 593,000 paying subscribers globally from 371,000 reported at September 30, 2014. The company also reported that 79 percent of subscriber growth occurred in markets outside of Australia and New Zealand, while in the US it was 114 percent, to 47,000 subscribers.

Meanwhile, Xero's investment in intellectual property for the quarter totalled NZ$11.1 million, and NZ$34.5 million for the nine-month period.

At the start of the year, Xero announced it had appointed Trent Innes to its Australian managing director role, following the resignation of Chris Ridd, who is expected to step down at the end of March but will remain as an adviser for the next 12 months.