Xero’s next chapter of growth: 2018 financial results

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Today we announced Xero’s full-year earnings update to the market covering our financial and operating performance in the year ended 31 March 2018 (FY18). You can read the materials here: www.xero.com/about/investors

Following our achievement of a million subscribers last year, it’s fantastic to see the continued momentum in FY18.

We now have 1.386 million subscribers on the Xero platform, adding 351,000 in the last year. Over the past three years we’ve also reduced cash outflow as a percentage of revenue from 71% to 9% and grew revenue at a compound annual growth Rate (CAGR) of 49% over the same period.

Other highlights include:

Positive EBITDA of $26.0 million for FY18, compared to $(28.6) million loss in FY17
Cash flow from operating activities at $41.2 million for FY18, an improvement from $(4.4) million in FY17. Total cash outflow from operating and investing activities was $(36.9) million for FY18, reducing from an outflow of $(70.8) million in FY17
Gross margin improved 4 percentage points to 81%
Xero is a leader in the cloud accounting market in Australia, New Zealand and the UK We continue to make headway in North America and our subscriber numbers for the Rest of World were up 49%
ASX listing consolidation in February 2018 and inclusion in the S&P/ASX 100 in March 2018

I’ve been in the CEO seat for just over one month, having taken over from founder Rod Drury on 1 April. Rod’s leadership over the past decade deserves great credit for Xero becoming the exciting, fast growing business it is today. Xero will continue to benefit from Rod’s vision and insights as a non-executive director, and we look forward to continuing to work with him.

The focus for us now is to further develop Xero for continued growth, harnessing the power of the platform that Rod and the team have built over the past decade. We will leverage machine learning and artificial intelligence advances to help small businesses manage day-to-day and help accounting partners work more efficiently.

Several growth drivers are emerging that we are excited about including deeper penetration into existing markets, global expansion, adjacent products for small businesses and partners, transactional activities, the financial web and other data driven solutions.

Xero has built strong operating disciplines over the past few years, and we will continue to strengthen these foundations as we drive towards cash flow breakeven.

I’m really pleased to present these results on behalf of the Xero team, who all deserve great credit for our progress. Thanks also to our customers, partners and shareholders for your support. We couldn’t do this without you!