Xero’s H1 FY24 financial results: Evolving Xero to deliver on our global aspirations

Today we announced Xero’s half year financial and operating results to 30 September 2023 (H1 FY24).

The results highlight our continued strong revenue growth, which contributed to Xero’s emerging profitability.

The strong operating results saw operating revenue up 21% (20% in constant currency (CC)) to $799.5 million. This, along with disciplined cost management and restructuring outcomes, supported a 90% increase in EBITDA compared to H1 FY23, to $206.1 million. This reflected our ongoing focus on balancing growth and profitability, and resulted in an increase in free cash flow to $106.7 million, representing a free cash flow margin of 13.3% compared to 2.4% in the prior period. This focus was also reflected in our net profit, which increased to $54.1 million compared to a net loss of $16.1 million in H1 FY23.

Our total subscribers increased 13% to 3.95 million with annualised monthly recurring revenue (AMRR) growing by 19% to $1.77 billion (22% in CC). Total lifetime value (LTV) grew 14% (17% in CC) to $14.8 billion, as average monthly churn (0.94%) remained low and average revenue per user (ARPU) improved a further 6% (8% in CC). This highlights the value and trust customers place in Xero to help them manage their business in changing economic circumstances. 

Our H1 FY24 performance demonstrates good momentum. As we look forward, we’re sharpening our focus on Xero’s key levers of growth as we aspire to become a higher performing SaaS company. We will continue to balance growth and profitability, while delivering more value to our customers.

Result highlights (All figures are in NZD and comparisons are made against H1 FY23) 

• Operating revenue $799.5m, up 21% YoY
• Subscribers 3.945m, up 449,000 YoY
• Average revenue per user (ARPU) $37.38, up 6% YoY
• Annualised monthly recurring revenue $1,769.5m, up 19% YoY
• EBITDA $206.1m, up 90% YoY
• Operating income $67.4m, up $46.7m YoY
• Net profit $54.1m, up $70.2m YoY
• Free cash flow $106.7m, up $91.1m YoY
• Total subscriber lifetime value $14.8b, up $1.8b YoY
• Gross margin percentage 87.5%, up 0.5pp YoY

In this next chapter, we will look to optimise our levers for growth and deepen customer engagement across our portfolio. As part of this evolution, we have provided updates on four key areas to deliver on our global aspirations:

1. Sharpening Xero’s focus on segments and mix as a key lever for growth 
2. US business review shows focused growth opportunity in two key segments with more consistent execution
3. Evolving Xero’s executive leadership team to manage a global portfolio
4. AI – a key part of Xero’s current offerings and opportunity to invest and experiment further

More detail on these strategic updates can be found in our ASX Announcement, Investor Presentation and on Xero’s Investor Centre.

We’re pleased to deliver this strong operating result. Xero provides a product customers love and value, as shown by our continued revenue growth and improving profitability. We are committed to evolving our business to deliver on our global aspirations. The opportunity ahead is significant and we remain focused on our vision, to be the world’s most insightful and trusted small business platform.

On behalf of everyone at Xero, I would like to thank you for your ongoing loyalty and support.

Best,

Sukhinder Singh Cassidy

CEO