XRO -11.58%: Hit hard today following their FY22 results (March year-end) with a few swings and roundabouts in the update. The headline numbers were solid, and XRO is delivering on its long term aspirations, however, as we know in this market, growth is being shunned and any semblance of weakness in the composition of results is being dealt with harshly. The key takeaway’s as follows: Revenue of $1.1bn was a slight beat while EBITDA was a slight miss. They reported a loss after tax of $9m which was slightly more than expected but not the main issue. They ended the period with 3.3m subscribers which was very slightly behind some expectations – not by much though, about 60k subs light with growth in the 2H to blame.
The real issue from a market’s point of view is a lack of operational leverage becoming obvious – the concept of profits increasing at a quicker rate than revenue once scale is achieved. Based on stated cost guidance, XRO is not there yet, instead, they’re still investing very heavily in the platform and that focus on growth over profitability is at odds with the market.
MM is continuing to hold Xero (XRO) in the Flagship Growth Portfolio
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