Published on the 11/12/2014 | Written by Newsdesk
After a rugged year on the stock exchange the cloud accounting provider has got its mojo back indicating US growth and listing plans…
Rod Dury, CEO of Xero, has told online US financial and business news outlet The Street that the company is considering a US initial public stock offering next year.
Few other details were forthcoming, but in its 2014 interim report provided to the New Zealand Stock Exchange in November, the company said that its momentum continues in all markets and noted that the US was its fastest growing market. It grew the number of Xero users by 120 percent and revenues by 131 percent. This growth, however, comes off a low base with just 22,000 US users out of a total 371,000 users internationally.
Blair Galpin, senior equity analyst at Forsyth Barr said that Xero has been talking about a US listing for the last couple of years but has been waiting to hit particular milestones before progressing with it, in particular achieving $US100 million annualised revenue, which Drury confirmed Xero has made in his interview with The Street.
“One important reason for the listing is the visibility it would provide Xero in that market, which it believes will be useful in attracting customers. We believe Xero will also look to raise additional capital at that point in time. This is not a new or unexpected announcement but does further cement its likelihood in the middle of next year,” said Galpin.
Xero has had a difficult start in the US. It faces strong competition from established local player Intuit, maker of QuickBooks which has around 1.5 million users. The cloud accounting market is also still in its infancy in the US. Xero acquired a modest 4,000 customers in North America during the six months to September and its stock has had a rough ride on its NZX/ASX dual-listing with prices falling to almost a third of a heady peak of $NZ45.99 that it hit after it announced a $NZ180 million capital raising and US growth plans. The stock is currently trading at $NZ15.90. Indeed, broking firm Woodward Partners suggested in a research note in October that Xero should seriously consider backing out of the US market – an idea that Drury branded as “ludicrous”.
Xero changed its leadership team in the US in September. Peter Karpas stepped down as Xero’s head of North America after only being in the position for seven months and soon after Xero appointed John Forrester as VP of US marketing, James Maiocco as GM of business and corporate development and Angus Norton as senior vice president/chief product officer. In November Andy Lark, former marketing lead for Dell and Commonwealth Bank with 15 years’ experience marketing in the US was appointed as the chief marketing officer of Xero based in Sydney.
The acquisition of Monchilla in early November has also helped to accelerate Xero’s payroll expansion in the US. Xero purchased Seattle-based Monchilla from its founders, Jack Couch and Nanjuan Shi, who will continue to be involved in product development.
“We were really impressed by the Monchilla team and how they have approached filing and payment of payroll taxes in the US. Combining this capability with the work our own team are doing will allow us to develop a world-class payroll experience for the US over the next 12 months,” said Drury at the time of acquisition.
Xero said it will continue to support Monchilla’s current customers and will transition them over time to the Xero platform.
By November 20th the firm’s North American customer numbers had more than quintupled, reaching 22,000 in an addressable market estimated at 29 million small businesses. Today Xero announced that it has passed the 400,000 customer milestone worldwide and according to The New Zealand Herald major US investment firm Fidelity has also acquired a 5.4 percent stake in Xero in a move Drury is calling a solid endorsement of the company’s prospects.
“Today, New Zealand and Australia’s most loved accounting platform has achieved a similar position in the UK and is back on track in the US” said Drury in a media release.
iStart is awaiting comment from Xero on details behind the potential US IPO.
