Today online accounting provider Xero announced they have added 1,000 customers over the last 50 days to take customer numbers to over 4,000. At this rate Xero are on track to double the 2,200 customers they had at 30 September 2008 by the end of their financial year (31 March 2009). The highlight of the announcement for me was the reporting of 1,000+ UK customers.
[Update: Xero have blown out my 4,000 figure announcing over 6,000 paying customers at 31 March 2009]
While impressive this is the growth rate required if Xero are to meet their target for the NZ market of 8,000 customers and break-even by May 2010. Xero still have some work to do to reach the estimated 12,000+ customers required to break-even. The estimated $2.6 million annualised revenue of their 4,000 customers (estimated revenue per customer $54 per month) will push back any possible requirement to raise additional capital. Current shareholders and potential investors will be looking forward to the release of the annual result later this year for an insight into revenue per customer, expenditure and balance sheet information.
Xero’s shares remain thinly traded (154,000 shares or $126,000 traded this year) with the share price of $0.75 representing a market capitalisation of $42 million. As I have stated previously Xero should be seen as a longer term investment (3 years +). Although the results to date have addressed some of the risks/uncertainties identified at the time of listing it is still early days for a company that aspires to be a global force in online accounting.
Great execution and result for the Xero team. This performance needs to be built on to meet projections, get to break-even and deliver the required return for investors.