Accounting software company Xero widened its annual loss while growing operating revenue 36 per cent and subscriber numbers by 31 per cent.
Xero reported a $27.1 million net loss for the 12 months ended March, up from the previous year's $24.9 million loss, but said it made a profit of $1.4 million in the second half.
It also had positive free cash inflow for the first time of $6.45 million, 1.2 per cent of revenue, in the year compared with a $28.5 million outflow the previous year.
"A number of financial metrics point to Xero's improving profitability and increasing cash generation in full-year 2019," the company says in a statement.
"Gross margin percentage improved in FY19 by 2.1 percentage points to 83.6 percent, contributing to a 4.4 percentage point increase in ebitda (earnings before interest, tax, depreciation and amortisation) – excluding impairments – to 16.6 percent due to improving efficiencies in sales, marketing and product design and development costs," the company says.
The net loss for the year is primarily due to impairments taken in the first half.
Ebitda excluding impairments rose 84 per cent to $91.8 million in the year.
Average revenue per user rose to $29.25 a month from $29.13 and lifetime value per subscriber rose 3 per cent to $2,398.
Subscriber numbers rose to 1.82 million from 1.39 million the previous year. Subscriber numbers in Australia and New Zealand passed a million and were up 22 per cent, British subscribers rose 48 per cent to 151,000, and North American subscribers rose 48 per cent to 195,000 – excluding Hubdoc, the increase was 44,000, or 33 per cent.
Xero is challenging the US incumbent Intuit which is due to report its third quarter results next week. Intuit had nearly 3.9 million subscribers to its online QuickBooks product at Jan. 31, of which 2.9 million are in the US.
Xero raised US$300 million from convertible notes in October last year, "demonstrating investor confidence in the business. Funds raised provide the flexibility to execute acquisitions and investments that will enhance and extend Xero's small business platform and ecosystem," it says.
The company had $121.5 million in cash at March 31, up from $21 million a year earlier.
During the year just gone, it bought Hubdoc, a data capture solution, and Instafile, a British tax filing and compliance tool.
"We've delivered a strong result with a number of major milestones for Xero, including our first positive free cash flow result and the UK adding more than 100,000 new subscribers within a six-month period," says chief executive Steve Vamos.
"Another important milestone was the positive bottom line result delivered in the second half, which demonstrates our improving profitability," Vamos says.
"As we head into FY20 and beyond, we're making great progress towards our strategic priority of driving cloud accounting adoption globally. We have a genuine competitive edge by prioritising investment in growth and partnering closely with accountants and bookkeepers to deliver a human-centred technology experience for small business communities across the world."
The company says it expects free cash flow in the current financial year will be similar as a proportion of revenue as in the year just gone.
Xero shares, which now trade only on ASX although it remains headquartered in New Zealand, closed yesterday at A$54.31, down from their record A$55.98 reached earlier this month and up more than 35 per cent on a year ago.