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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