The accounting software provider’s half-year results to 30 September have seen it post operating revenue growth of 21 per cent to NZ$409.8 million, down from 32 per cent it recorded in September 2019.
Xero’s net profit after tax jumped from NZ$1.3 million to NZ$34.5 million, with free cash flow rising from NZ$4.8 million to NZ$54.3 million.
The company believes its strong performance reflects its disciplined financial management during the coronavirus pandemic, including a 10 per cent reduction in sales and marketing costs.
Xero also believes COVID-19 has helped it grow its subscriber base, with its Australian market reaching 1 million subscribers late in the half off the back of demand for cloud accounting due to the JobKeeper stimulus measure and the ongoing rollout of Single Touch Payroll.
Total subscribers are now up by 19 per cent to 2.45 million, with its New Zealand market increasing by 13 per cent to 414,000 subscribers.
UK subscribers grew by 19 per cent to 638,000, bringing revenue up by 33 per cent. Xero attributes the growth down to the UK government’s Making Tax Digital Initiative.
Its North America market only grew by 4 per cent despite adding 17 per cent more subscribers to 251,000, with Xero attributing this to the bundling of Hubdoc into its Xero Business Edition subscriptions, and the absence of Xerocon this year.
“Subscriber growth was positive in all geographies, with stronger net subscriber additions in Australia and New Zealand with relatively less disruption in those markets from COVID-19,” said Xero chief executive Steve Vamos.
“During a difficult period, it’s pleasing to report we grew to exceed 1 million subscribers in both Australia and in our international segment.”
Mr Vamos also said Xero would continue to prioritise investment expenditure, with the company spending $140 million in the first half of the year, 29 per cent more compared with the same period last year.
“This result demonstrates the value our customers attribute to their Xero subscription and the underlying strength of Xero’s business model. We continue to prioritise investment in customer growth and product development in line with the long-term opportunity we see,” he said.
“We’ve responded to COVID-19 by delivering new products and services that meet our customers’ and partners’ changing needs. These include assisting with small business access to government stimulus and delivering Xero On Air, our first global digital customer and partner engagement event.”
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