Today we announced Xero’s full year financial and operating results to 31 March 2023 (FY23).

Having started my journey as Xero’s CEO in February this year, I’m pleased to share our strong FY23 operating results, and I’m deeply excited about our opportunity to help power the global small business economy.

Our results demonstrate Xero’s resilience in a complex macroeconomic environment, our valuable customer proposition, our increasing efficiency, and commitment to even more disciplined, customer-focused growth.

We grew FY23 operating revenue by 28% (25% in constant currency (CC)) to $1.4 billion, which contributed to a 45% increase in adjusted EBITDA compared to FY22 to $301.7 million. This drove a significant increase in free cash flow to $102.3 million, reflecting a free cash flow margin of 7.3% compared to 0.2% in FY22.

We also incurred non-cash impairments and associated costs, and restructuring charges during the year. This led to EBITDA decreasing 26% compared to FY22 to $158.4 million. This included a $77.9 million impairment to Planday (mainly reflecting a reduction in market valuation multiples along with operational performance), $48.5 million of impairments and other costs related to Waddle, $34.7 million in restructuring costs, and non-cash accounting revaluation gains of $17.9 million.

Total lifetime value grew 23% (21% in CC) to $13.4 billion. This was driven by double digit subscriber growth across all regions – as average monthly churn (0.90%) remained low and ARPU improved 10% (8% in CC). This underscores the trust customers place in Xero to help them manage their businesses.

Financial results

Performance highlights FY23 (All figures are in NZD and comparisons are made against FY22)

• Operating revenue increased 28% to $1,399.9 million
• Total subscribers increased by 470,000 to 3.74 million
• Annualised monthly recurring revenue (AMRR) grew 26% to $1,553.8 million
• Total subscriber lifetime value grew $2.5 billion to $13.4 billion
• Gross margin percentage remained flat at 87.3%
• Adjusted EBITDA increased $93.0 million to $301.7 million
• Operating income grew 61% to $57.3 million
• Net loss grew $104.4 million to $113.5 million
• Free cash flow was $102.3 million, up $100.2 million
• Total available liquidity $1.1 billion, cash on hand, short-term deposits and undrawn committed debt facilities

Our strong underlying operating result is underpinned by continued revenue momentum from both subscriber and ARPU growth. We’re pleased to deliver these results – supported by our program to improve operational efficiency and effectiveness. This gives us greater ability to deliver better value for all stakeholders and take advantage of the significant opportunity ahead.

We remain focused on delivering ongoing value for customers through our product and technology efforts, while continuing to invest in our multi-year platform modernisation strategy to unlock long term efficiency, scalability, productivity and speed to market improvements.

Our next chapter

We’re pleased with Xero’s FY23 performance and we continue to execute well. We enter FY24 with strong momentum, but there is much more to do.

We’re positive about the multiple levers Xero has to deliver growth – including driving further adoption of cloud accounting and deepening customer engagement – as we strive to deliver the world’s most insightful and trusted small business platform. We are committed to building on the strong momentum that you can see in our FY23 results, and pursuing our aspiration to build a higher performing global SaaS company.

I’m excited about the opportunity to help drive Xero’s next chapter of growth.

I’d like to extend my sincere thanks to our Xero team, our customers, partners, shareholders, and everyone who supports Xero.

You can find Xero’s FY23 results materials on our Investor Centre: www.xero.com/about/investors