The best performer on the S&P/ASX 200 index on Thursday has been the Xero Limited (ASX: XRO) share price.
The business and accounting software company’s shares have stormed over 10% higher to an all-time high of $59.88 following the release of an impressive full year result this morning.
What happened in FY 2019?
Xero continued its stellar growth in FY 2019 with operating revenue growing by 36% year on year to NZ$552.8 million.
A key catalyst of this strong top line growth was the increasing demand for its software, particularly in the United Kingdom. During FY 2019 the company reported a 31% increase in total subscribers to 1.818 million.
And for the first time it was the company’s international operations that contributed the most net subscriber additions. They came in at 239,000 in FY 2019, compared to 193,000 net subscriber additions (22% growth to 1.077 million) in the ANZ market.
The majority of the company’s international net subscriber additions came from the UK market, where the company reported a net increase of 151,000 subscribers. An impressive +100,000 of these came in the second half of the financial year, lifting total UK subscriber numbers by 48% year on year to 463,000.
The company also reported strong growth in the North American market. It finished the period with 195,000 subscribers, which was also a 48% increase year on year.
Finally, the Rest of the World segment reported a 43% increase in subscribers to 83,000. This was driven by strong progress in new markets including the recently established offices in Hong Kong and South Africa.
Overall, thanks to this strong subscriber growth and a modest rise in average revenue per user, Xero grew its Annualised Monthly Recurring Revenue (AMRR) by 32% to NZ$638.2 million and its total subscriber lifetime value (LTV) by 36% to NZ$4.4 billion.
Is Xero profitable now?
Xero posted EBITDA (excluding impairments) of NZ$91.8 million in FY 2019, up 84% from NZ$48.2 million in the prior period year.
And while the company posted a full year net loss NZ$27.1 million, this was primarily due to impairments in the first half. The company actually posted a net profit of NZ$1.4 million in the second half of the year.
Looking ahead, management intends to focus on growing its global small business platform and maintains a preference for reinvesting the cash it generates to drive long-term shareholder value. It expects FY 2020’s free cash flow to be a similar proportion of total operating revenue to that reported in FY 2019.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and Xero. The Motley Fool Australia has recommended Nearmap Ltd. and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.