Last Friday I fielded a quick call with Hamish Edwards and Gary turner of Xero while stood in the pouring rain on a London street. It was the only place I could get a decent connection. Anyhoo, Hamish talked through the results. By the numbers:
- Operating revenues from customers of $1.3m, up 282% on the same period last year.
- Operating costs of $5.0m, up 31%. This reflects investment in upgrading Xero’s hosting capacity; enhancing the infrastructure for software delivery and online customer support; increasing sales capability in the UK and establishing a sales base in Australia.
- Net loss for the period of $3.8m – an increase of 10%.
- Cash and bank balances of $26.0m as at 30 September 2009.
- 12,000 paying customers as at 30 September 2009. This reflects growth of 445% compared to 30 September 2008 and is double the customer count at 31 March 2009. Customer growth is now in excess of 1,000 per month.
- 73 employees at period end.
By any measure, this is a credible performance and a solid demonstration of SaaS’ validity as both a business model and alternative to on-premise software. Without knowing the final month’s numbers it is difficult to accurately project annualized growth. I will endeavour to get more information on this in the coming days.
Doubling the number of users in 6 months is exceptional although it does seem that acceleration has slowed for the time being. That’s not unusual for this period in the annual cycle. However, we should look for a significant uplift around the end of the year to see if Xero is able to maintain the momentum.
Throttling the loss to an increase of 10% is welcome and indicates the company will be able to conserve cash going forward.
During our conversation, Hamish mentioned a possible entry to the US market. I’d prefer to see the company consolidate in its home markets before attempting such a venture. The US has been a graveyard for many a non-US company and while it is tempting to expand I’d prefer to see the company consolidate its position . Entering the US would be the equivalent of another start up. Including infrastructure costs, it’s easy to see how it could burn $10 million in a very short period. Hence my caution.
As a side issue, it’s worth noting that Xero’s blog is picking up traffic and traction as a customer service and information point. This has a beneficial effect for the company and I am surprised I don’t see greater use of this medium by other SaaS vendors.
Later in the week, I hope to get a UK specific update.