XRO +8.92%: A good update from the accounting platform today which solid progress as they work towards balancing growth and profitability. 2H23 Revenue of NZ$741m was inline with consensus while they ended the period with 3,741,000 subscribers, slightly better than expected and a few more than Market Matters. The momentum in subs was also solid, particularly in ANZ where net adds were still at an all-time high. Average Revenue Per User (ARPU) was better than expected and despite the challenges playing out in the UK, performance was inline with expectations. The only real blip was the US business where their 32k net adds was slightly light on. This all drove adjusted EBITDA of $193m, ~10% ahead of the $174m consensus, while they reiterated March guidance of FY24 operating expenditure to revenue ratio of ~75%. Lower R&D spend also drove a big beat in terms of free cash flow. All in all, a really solid update to a business that is going through some adjustment to ramp up earnings.
MM remains long Xero (XRO) in our Flagship Growth Portfolio
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