Xero returns to profit by banking AU$3.3 million during FY20

It follows on from last financial year's net loss of AU$27.1 million.
Written by Aimee Chanthadavong, Contributor

Xero reported it has achieved a net profit of NZ$3.3 million for the full year to 31 March 2020, an improvement of NZ$30.5 million after last financial year's net loss of AU$27.1 million.

Earnings before interest, tax, depreciation, and amortisation (EBDITA) was NZ$137.7 million for the full year, an 88% year-on-year boost from NZ$73.2 million.

The company attributed the improved results to ongoing growth in operating revenue, improved gross margin, and disciplined management of operating costs. The company added digitisation of tax and compliance remained a significant driver during the financial year.

Operating revenue lifted by 30% from NZ$553 million to NZ$718 million, while gross margin lifted by 1.6 percentage points from 83.6% to 85.2%.

When it came to subscribers, Xero reported 26% growth in total subscribers from 1.82 million last year to nearly 2.29 million during FY20.

Australian subscribers continued to make up the largest portion of total subscribers where during the year it reached 914,000, a growth of 26% year on year, with 188,000 net subscriber additions during the year. As a result, revenue in Australia lifted by 23% to NZ$320 million.

Meanwhile, New Zealand subscribers grew by 12% to 392,000, with the addition of 41,000 new subscribers in FY20; UK subscribers increased by 150,000 to 613,000 during the year, and North America subscriber numbers saw a 24% uplift during the year to 241,000.

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As part of its financial results, the cloud accounting firm also acknowledged the impact of COVID-19 on the business, which resulted in the company "moving swiftly to roll out a range of new customer and partner support services", including product development around cash flow insights, as well as in-application data and preparation for government stimulus packages.

"Many of our customers and partners are having to adapt the way they operate while investing enormous effort to survive at this difficult time. Helping them is our immediate priority," Xero CEO Steve Vamos said.

Looking ahead, the company acknowledged that trading in the early stages of FY21 had been impacted by the COVID-19 environment.

"The continued uncertainty surrounding COVID-19 means it would be speculative for us to say anything more at this time on its potential impact on our expected performance for FY21," it stated.

"Xero's ambition is to be a long-term oriented, high-growth business. We continue to operate with disciplined cost management and targeted allocation of capital. This allows us to remain agile so we can continue to innovate, invest, support our customers, and respond to opportunities and changes in our operating environment."

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