Today we announced Xero’s half year financial and operating results to 30 September 2021 (H1 FY22).

Our performance demonstrates the benefits of investments made in the areas of product development, go-to-market capabilities and people over a number of years, to support the execution of Xero’s global strategy.

In the video below, I share some highlights from our H1 FY22 results, joined by our CFO, Kirsty Godfrey-Billy.

Financial results

While conditions varied across our markets, our strong performance is evident in a number of metrics which trended positively over the period, including subscriber numbers, average revenue per user (ARPU), gross margin and churn.

Performance highlights H1 FY22 (all figures are in NZD and comparisons are made against H1 FY21):

• Operating revenue was up 23% to $505.7 million (26% in constant currency (CC))
• Annualised monthly recurring revenue (AMRR) grew 29% to $1,132 million
• Total subscribers increased by 23% to 3.0 million
• Total subscriber lifetime value (LTV) grew by 61% to $9.9 billion
• Free cash flow was $6.4 million compared to $54.3 million
• EBITDA of $98.1 million decreased by 19% from $120.8 million
• Gross margin increased by 1.4 percentage points to 87.1%

EBITDA, net profit and free cash flow decreased versus H1 FY21 due to an increased level of investment spend across both sales and marketing and product development. The movement in these metrics reflects the heightened focus on cost management in response to the initial impacts of COVID-19 during H1 FY21.

Our decision to increase reinvestment into customer growth reflects our commitment to execute our strategy and pursue our long-term opportunity and aspirations.

Product and technology investment in the period continued in line with our long-term growth ambitions and included core accounting and platform enhancements.

Enhancing our ecommerce and inventory capabilities

Today, we also announced that Xero is acquiring LOCATE Inventory, a US cloud-based inventory management provider, to enhance Xero’s ecommerce capability and better support goods-based small businesses.

The acquisition supports our strategic priority to grow the small business platform and supports our growth opportunities in North America and globally as we strive to be the most insightful and trusted platform for small business. The new offering is expected to launch to US customers before being made available in other markets.

We also launched a new integration with Shopify and have joined the Shopify Plus Certified App Program (PCAP), a select group of Shopify partners that support the advanced needs of Shopify’s global merchants. The integration helps small businesses simplify reconciliation, interpret sales data, and use finance, cash flow, and performance insights within the Xero platform to better manage and grow their business.

A special thanks to our community

Our results wouldn’t be possible without the efforts of the entire Xero team, our customers, shareholders and our community of accounting and bookkeeping partners. We thank you all for your support.

You can find all Xero’s H1 FY22 results materials here: www.xero.com/about/investors