Xero: Showing incredible resilience in a tough market
About the author:
- Author name:
- By Nick Harris
- Job title:
- Senior Analyst
- Date posted:
- 19 May 2023, 7:30 AM
- Sectors Covered:
- Telecommunications, Technology
- Xero (ASX:XRO) reported a good FY23 result that showed it can grow revenue at a healthy rate (+28% YoY) with a combination of subscriber growth (+14% YoY) and higher Average Revenue Per User (ARPU), which was up 8% YoY in constant currency.
- The highlight was an impressive lift in Free Cash Flow (FCF) to ~NZ$102m. Both Adjusted EBITDA and FCF increased by around NZ$100m over FY23.
- Under new management, the strategy has moved from reinvesting in growth to a balanced approach to profitable growth and capital allocation. Investors are clearly supportive of this and the share price has rallied ~20% over the last few months.
- After a strong share price performance, we move to a Hold recommendation.
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