"Xero continues to deliver strong subscriber growth in its core markets of Australia, New Zealand and the United Kingdom and some positive early signs in new markets," he said.
"At the least, we think the result has enough in it for Xero to hold on to recent gains."
Xero shares climbed 6% as the company moved closer to its maiden profit. Customer numbers continued to swell and its 2017 net loss for the year ended March narrowed as revenue grew.
The Wellington company said operating revenue was $295.4million in the 12 months to March 31, up 43% on the year earlier, or up 51% in constant currency terms. Its net loss was $69.1million, 16% narrower than the $82.5million reported in the previous corresponding period. The shares rose $1.30 to $23.15.
Xero’s loss on an earnings before interest, tax, depreciation and amortisation basis narrowed to $28.6million from $59.9million. In the second half of the year, its ebitda, excluding share-based payments, turned positive at $1.6million versus a loss of $17.4million in previous corresponding period.
The company said it now had 1.03 million subscribers, after adding 318,000 in the past year.
Chief executive Rod Drury declined to say when he expected Xero to post a profit.
"I am very careful not to put dates on that sort of stuff."
The company was ebitda-positive in the second half of the year, excluding share-based payments, and the operating cash flow also moved into positive territory.
"It’s a story of balance. I don’t think there’s been a business operating at this size and scale out of New Zealand."
Market expectations were for Xero to achieve a profit in the 2019 financial year.
Mr McIntyre said Xero’s cash burn of $24million in the second half of the financial year was a significant improvement on the $39million in the previous corresponding period.
Cash balance at March 31 was $86million. That should be sufficient for the company comfortably to get to cash break-even, in line with guidance.
Xero continued to perform well in its established markets. New Zealand reached 246,000 subscribers at balance date versus Craigs’ forecast of 243,000. Australia had 446,000 (Craigs: 438,000), and the United Kingdom had 212,000 subscribers (Craigs: 206,000).
Even North America delivered on modest expectations of 93,000 versus 92,000, although Xero remained well behind market leader Intuit, he said.
The rest of the world — which included South Africa, Ireland, Singapore, Malaysia and the Philippines and others where Xero had been investing increasing resources — delivered the largest increase in percentage terms of 39,000 subscribers at the end of the year versus the forecast of 34,000, or nearly 15%.
"This is a positive early indicator of potential success for Xero in these markets long term," Mr McIntyre said.
Mr Drury said in the last two years Xero had added half a million customers.
Five years ago Xero had around 50,000 customers.
"We knew we had to make that massive investment in infrastructure because we knew we had to on-board that many customers. We have been really focused on making sure we can do what we need to do with the resources we have. That’s driving great margin and getting us towards breakeven."
He did not expect expansion to slow down and there was still more potential in New Zealand, Australia, the US and the UK, in particular where Xero was the undisputed market leader, Mr Drury said.
Given the speed of change, Xero was updating its software three or four times a day in different projects.
