Xero (ASX: XRO) Soars on Strong FY24 Results, Defying Market Slump

2 min read | May 23, 2024 02:38 PM AEST | By Team Kalkine Media

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Xero (ASX: XRO) Soars on Strong FY24 Results, Defying Market Slump — Image source: © Transversospinales | Megapixl.com

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The share price of Xero Ltd (ASX: XRO) is making significant gains this morning following the release of its full-year results for FY24. Within the first hour of trading, shares of the cloud-based accounting software company have surged by 9.46% to reach AU$135.60 apiece.

Xero shareholders are expressing jubilation over the company's latest financial performance, which has contributed to today's market excitement. Here are the key figures that have fueled this positive sentiment:

- Operating revenue increased by 22% year-on-year to NZ$1.71 billion.

- The subscriber base grew by 419,000 to reach 4.16 million.

- Average revenue per user (ARPU) rose by 14% to NZ$39.29.

- Gross margin improved from 87.3% to 88.2%.

- Net profit after tax (NPAT) saw a significant swing, moving to NZ$174.6 million from a NZ$113.5 million loss.

Xero's ability to achieve both revenue growth and profitability in FY24 marks a significant milestone for the company, especially considering its previous challenges in attaining profitability. Notably, Xero has now achieved the Rule of 40, indicating a healthy balance between revenue growth and free cash flow margin.

CEO Sukhinder Singh Cassidy emphasized the company's commitment to its strategic objectives, stating, "This result shows we're doing what we said we'd do." Xero's focus on balancing subscriber additions with ARPU has been instrumental in driving its financial performance during FY24.

While Xero has refrained from providing specific earnings or revenue estimates for FY25, it anticipates that total operating expenses as a percentage of revenue will be around 73% in the next financial year. Additionally, product design and development costs are expected to constitute a larger portion of revenue.

Despite the lack of forward guidance, Xero's strong performance in FY24 underscores its resilience and strategic positioning in the market. The company continues to see robust growth in its key markets, with Australia, New Zealand, and international regions all contributing to its revenue expansion.

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