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Xero net loss tanks to $113.5M

Xero net loss tanks to $113.5M

Impairments to Planday, Waddle and restructuring costs impact bottom line

Sukhinder Singh Cassidy (Xero)

Sukhinder Singh Cassidy (Xero)

Credit: Xero

New Zealand-founded Xero has gone further into the red after reporting a net loss tanking to NZ$113.5 million for its financial year ending 31 March 2023.

In the previous year, net loss was $9.1 million in the red.

Earnings before tax (EBITDA) also dropped a further 26 per cent to NZ$158.3 million in comparison to the same time last year. 

The software accounting firm attributed the loss to impairments to Planday, Waddle and restructuring costs. 

Xero’s exit of the cloud-based lending platform Waddle in FY23, which it acquired in 2020, resulted in an NZ$48.5 million write-down. It also shed 800 staff in March, stinging NZ$34.7 million in restructuring costs. 

FY23 also saw an impairment of NZ$77.9 million to 2020 acquisition Danish workforce management platform Planday, reflecting a “reduction in market valuation multiples along with operation performance”, and non-cash accounting revaluation gains of NZ$17.9 million. 

Revenue grew 28 per cent to NZ$1.4 billion. It also reached 3.74 million subscribers, reflecting growth of 14 per cent, resulting in average revenue per user (ARPU) growth of 10 per cent driven by pricing and increase use of Xero’s growth products. 

Total revenue increased 26 per cent to NZ$798 million and ARPU increased 7 per cent with total subscribers reaching 2.13 million. 

Australia saw positive growth with the addition of 222,000 subscribers to reach a total of 1.57 million.
New Zealand contributed 55,000 new subscribers, totaling 567,000.

Along with reinvestment into “strategic priorities”, Xero’s “long-term aspiration” is an improved operating expenses to operating revenue ratio. In FY24 it has set a goal of 75 per cent, aiming to improve on operating income margin compared to FY23. 

"Xero’s strong underlying operating result is underpinned by continued revenue momentum from both subscriber and ARPU growth. Our FY23 performance demonstrates Xero’s resilience to the macroeconomic conditions of the past year, and the value we provided to small business customers in a challenging environment,” said Xero CEO Sukhinder Singh Cassidy, who became Xero's third CEO in November. 

“We remain well positioned to take advantage of the significant long-term opportunity for cloud accounting and our small business platform as we prioritise disciplined, customer-focused growth.”

Xero’s international markets also saw steady growth, with revenue increasing 30 per cent to $602 million, a 15 per cent increase in ARPU and subscribers growing to 1.6 million. 

Specifically, the UK gained 120,000 new subscribers and North America saw a growth of 45,000 subscribers. Xero sees a “large and underpenetrated opportunity” in its international markets, the report said, and remains focused on localising its product across global markets. 

“We’re positive about the multiple levers Xero has to deliver growth - including driving further adoption of cloud accounting and deepening customer engagement - as we strive to deliver the world’s most insightful and trusted small business platform,” Singh Cassidy said. 

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