Cloud accounting software provider Xero has continued its relentless march towards cashflow break-even in its first half result. But the company isn’t yet talking about when it might achieve bottom-line profit.

Cash-burn on operations (the rate at which a company is spending its capital to finance its overheads) dropped significantly in both absolute and proportional terms in the six months to Sept. 30, allowing the company to double its pre-impairments operating earnings surplus for the half-year from $17.1 million to $34.5 million.

However, when impairments caused by software development write-offs booked at the time it acquired US payroll solution provider Gusto are included, earnings before interest, tax, depreciation, and amortisation came in at $16.8 million, compared with $15.6 million in the same half last year.

On a statutory earnings basis, the company saw its half-year loss rise to $28.6 million from $19.6 million.

The company says in its statements to the Australian Stock Exchange that “excluding capital outlays for mergers and acquisitions, Xero is managing the business to cashflow break-even within its current cash balance, without drawing on its debt facility or the net proceeds from convertible notes” issued last month.

“Cash outflow (operating less investing outflows) in the financial year ended 31 March 2019 is forecast to reduce from the financial year ended 31 March 2018,” the company said.

For the half-year, operating and investing cash outflows totalled $40.1 million, up on $30.9 million in the same half a year earlier. However, once cash applied to investments is excluded, that dropped to $9.8 million in the current half, versus $30.9 million in the previous comparable half.

Cash outflows represented 4 percent of total revenue, which was up 37 percent to $256.5 million in the half, compared with more than 15 percent in the first half of 2018 and almost 30 percent in the first half of the 2017 financial year.

Annualised monthly recurring revenue, a metric the company uses to demonstrate revenue momentum, rose 40 percent compared to a year ago, at $589.1 million. The company added 193,000 to its customer base, which is concentrated in Australia and New Zealand, growing strongly in Britain, and starting to penetrate the relatively under-developed US market for cloud accounting services. Gross margin improved 2.6 points to 82.8 percent, thanks to efforts to deepen partnership offerings, the company said.

Xero opened offices in Hong Kong during the half-year and is reporting growth in South African sales. 

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