Investors punished accounting software multinational Xero
(ASX:XRO) yesterday after it released mixed interim results which were topped by the surprise exit of its CEO Steve Vamos.
Mr Vamos departs after five years in the job, including seeing the company through the impact of the pandemic.
The shares dropped more than 10% on a day when the wider market was weaker after a poor lead from the US overnight and the latest crunching of the cryptocurrency sector.
The shares ended down 10.8% at $64.74.
Xero’s half year results showed that, while it beat forecasts on the revenue line, its earnings fell short of estimates.
Operating revenue was up 30% (27% in constant currency, or CC) to $NZ$658.5 million, annualised monthly recurring revenue (AMRR) jumped 31% (23% in CC) to $NZ1.49 billion; earnings before interest, tax depreciation and amortisation (EBITDA) rose 11% to $NZ108.6 million and there was a 16% rise in subscribers to 3.5 million.
Some investors were unhappy that the 30% jump in revenue only produced an 11% rise in EBITDA, which might explain some of the selling pressure, along with the departure of the CEO who is retiring and returning to what he did before- business coaching, mentoring and investment.
But the difference was easily explained by a $NZ25.9 million non-cash impairment driven by changed operational and market conditions for the Waddle (invoice/cash flow financing) business, which was partially offset by non-cash revaluation gains of $NZ10.8 million.
Xero pointed out that excluding these adjustments, EBITDA would have been up 28% to $NZ123.7 million, up 28% from a year earlier.
There was still a slight increase in operating expenses as a percentage of operating revenue from 83.4% to 83.9%.
Looking how the various markets performed, Xero said Australian revenue jumped 31% (25% in CC) to $NZ294 million after increasing subscribers by 126,000 to 1.47 million; New Zealand revenue was up 16% to $NZ84 million on a 24,000 increase in subscribers to 536,000; UK revenue jumped 32% (34% in CC) to $NZ175 million. Xero added 44,000 net subscribers, bringing its total to 894,000; North America revenue rose 44% (30% in CC) to $NZ44 million.
Xero added 15,000 net subscribers in the market, bringing its total to 354,000 and the Rest of the World revenue up 35% (25% in CC) to $NZ62 million. Subscribers grew 16,000 to 242,000.
The new CEO is Sukhinder Singh Cassidy who was described as an experienced Silicon Valley executive with more than 25 years’ global leadership experience.
This includes as President, Asia Pacific & Latin America at Google; President at StubHub; founder of the Boardlist; founder of Joyus, where she was CEO; and co-founder of Yodlee.
Ms Singh Cassidy will join the company at the end of month and formally become CEO on 1 February 1 next year.
