Xero, the cloud-accounting software provider based in New Zealand, has announced a net profit of NZ$54.1 million for the six months ending September. This marks a significant turnaround from the NZ$16.1 million loss reported during the same period last year. The company’s revenue also saw a notable increase, rising to NZ$799.5 million from NZ$658.5 million.
The positive financial results were driven by a 90% increase in earnings before interest, tax, depreciation, and amortization, which reached NZ$206.1 million. Xero achieved this impressive growth by reducing its operating-expenses-to-operating-revenue ratio from 83.9% to 79.1%.
Xero maintains its full-year expense target and anticipates a further reduction in the ratio to approximately 75% by the end of fiscal 2024. These improvements are expected to result from various measures, including a 15% reduction in the workforce.
Xero has outlined plans to eliminate between 150,000 and 200,000 long-idle lower-value subscriptions, primarily in the U.K. and North America, starting in the first half of fiscal 2025. By implementing this strategy earlier, in the first half of fiscal 2024, average revenue per user could have increased by approximately 3%-5%.
To strengthen its presence in the U.S., Xero intends to invest in marketing initiatives that target small businesses with multiple needs and provide better support for accountants and bookkeepers through client advisory services. The company’s U.S. and Canada unit will now report directly to new Chief Revenue Officer Ashley Grech.