Xero’s cash burn accelerates as costs run ahead of sales

Xero’s cash burn accelerates as costs to grow run ahead of sales

July 31 (BusinessDesk) – Xero, the cloud-based accounting firm, burned through more cash last quarter as the company’s rapid expansion saw wages, advertising and marketing payments run ahead of sales.

The Wellington-based company’s cash flow statement shows it was sitting on $68.8 million of cash as at June 30, down $9.4 million from three months earlier. It used $6.57 million in the first quarter of the year.

Xero is chasing sales growth in lieu of profits, with an aspirational target of 1 million customers worldwide, from 157,000 as at March 31.

In the latest quarter, receipts from customers rose to $12.97 million, from $11.4 million three months earlier. Staff costs climbed to $10 million from $6.9 million and advertising and marketing rose to $2.1 million from $881,000. That resulted in negative operating cash flow widening to $4.4 million from $2.5 million in the first quarter.

The company has ample cash to continue to pursue its growth plans. At the second-quarter burn rate, it could continue to fund its operations for at least seven more quarters without having to seek additional funding.

The shares slipped 1.1 percent to $17.31 on the NZX today and have soared 130 percent this year. It went public in 2007, selling shares in an initial public offering at $1 apiece.

(BusinessDesk)

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