Xero 1Q cash burn accelerates on rising staff, marketing costs

Monday 3rd August 2015

Xero, the cloud based accounting software developer, burned through cash at a faster pace in the June quarter as it ramped up spending on an expanding workforce and more than doubled expenditure on marketing and advertising.

The Wellington based company's operating cash outflow more than doubled to $17 million in the three months ended June 30 from the same quarter a year earlier, and widened from the $12.2 million outflow reported in the March period. Customer receipts jumped 72 percent to $40.5 million from a year earlier, with staff costs up 66 percent to $31.8 million and Xero's advertising and marketing spend more than doubling to $11.5 million. The staff costs included $3.7 million relating to annual tax payments on share based compensation, more than twice the $1.4 million it spent a year earlier

The company's investing activities reported a cash outflow of $11.5 million in the quarter as Xero bought intellectual property and other current assets, up from the $9 million outflow a year earlier.

"Xero continues to believe that ongoing investment in customer growth and product innovation is the correct strategy given the substantial opportunity and potential long term returns," it said in a statement. "Xero is focused on containing its full financial year cash outflow to similar levels to Xero's prior financial year."

The software developer's total operating and investment outflow was $88.4 million in the 2015 financial year, and it raised a further $147 million in the year from US based institutional funds.

Xero had cash and deposits totalling $243.5 million as at June 30, down from $268.9 million at the start of the quarter.

The shares fell 0.6 percent to $17.60, and have gained 9.6 percent this year.

BusinessDesk.co.nz

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