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Date : 13/05/2021

Xero Shares Sank on Financial Results Announcement

Xero Limited (XRO) is a software company that provides a cloud accounting software solution for small businesses. The software enables small business owners to run their business quickly and easily on the go by uploading their banking transactions and invoices. The software reconciles the transactions and provides the user with accounting services and dashboards for a subscription fee.

Xero reported full year earnings for FY21 earlier today and it demonstrates that it is well positioned to meet fast-evolving customer needs in an environment where cloud-based software is becoming increasingly important. COVID-19 impacted Xero’s top line progress in the first six months of FY21, however in the second half Xero delivered its strongest ever half year subscriber numbers with 288,000 net additions. Total Revenue increased by 18% to $848.8 million in constant currency.

The FY21 result reflected continued momentum in Australiaand New Zealand together with a notable recovery across Xero’s International markets in the second half of the year. International Net Additions in H2 FY21 of 155,000 more than tripled compared to H1 FY21. Over the full year, total global subscribers increased by 456,000 or 20% to reach 2.74million.

Revenues increased by 18% to $848 million, and EBITDA 39% to $191.2 million. While both these figures show quite a substantial growth for the company, both metrics have come up short in comparison to most analyst expectations. In addition to the miss, we are also caught in the middle of a rotation from growth to value, and tech stocks have been affected the worse. XRO shares dipped close to 13% and is currently trading at $117.39 a share.

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