US listing on the cards at Xero AGM
Xero's chairman Chris Liddell told investors today that listing publicly in the United States would be a "logical step" for the New Zealand-based cloud accounting provider as it works to broaden its international reach beyond Australia, the United Kingdom, and its home country.
"As our business continues to develop, a logical step for Xero would see us list on a US exchange," said Liddell in his presentation (PDF) at the company's annual general meeting in Wellington today.
"While this will be dependent on internal and external conditions at the time, this would be a significant milestone in becoming a truly global company. We should all be proud that Xero, as a New Zealand company, is playing on the international stage at this level," he said.
Meanwhile, Xero chief executive Rod Drury's AGM presentation documents (PDF) highlighted a three-phase strategy to expand its brand and services in the US over the course of 2015.
Drury said that, while it is early in the 2015 fiscal year, the company is forecasting subscription revenue growth of approximately 80 percent for the year, and is also expecting to pass through US$100 million in annualised committed monthly revenue, which would position the company for US listing "when the timing is deemed right".
According to Drury's AGM presentation, Xero's plans for the coming year in the US include the completion of its US leadership team and the appointment of new US directors in its bid to expand in the country.
Additionally, the company wants to ramp up its product innovation, sign deals with large distribution partners, and eventually position itself for a US-based listing in its run at the US market.
According to the documents, Xero also claims that the number of additional customers it is picking up in the US on a month-by-month basis has not only matched its sector rival Intuit but is in fact beginning to overtake the company's QuickBooks Online customer growth figures — this is despite reports that Xero’s momentum in the US has slowed recently.
According to Xero's annual financial report for the year ending March 2014, the company’s operating revenue was NZ$70.1 million, up 83 percent from the previous year's result, with a net loss after tax of around NZ$35 million.
Its customer tally was 284,000, with staff levels up to 758 globally, and 11,573 accounting partners, 45 percent of which were added in the 2014 financial year. The company also boasts NZ$210 million cash to invest.
In Australia, Xero claims it is the leading cloud accounting provider, with AU$1 billion of payroll processed in June 2014, paid to 350,000 employees. The company estimates that its broad advertising campaign in Australia has raised brand awareness in the country from 16 percent to 32 percent.
In the United Kingdom, Xero also counts itself as the leading cloud accounting provider, citing its strategic alliance with KPMG as a contributing factor. In the UK market, Xero has seen over 100 percent customer growth year-on-year.
In its home country, Xero claims that a quarter of all the small businesses in New Zealand are using its services, with NZ$45.2 billion — or 30 percent — of GDP value processed through Xero in the year ending December 2013.
While small to medium-sized enterprises have been Xero's largest target market sector, the company claims that larger businesses are now beginning to take on its services.