Xero (ASX:XRO) - CEO, Steve Vamos
CEO, Steve Vamos
Source: Xero
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  • Xero (XRO) has shed close to $10 off its share price after the global payroll and accounting business posted a $5.9 million net loss in 1H FY22
  • The first half loss is a 117 per cent decrease to the previous year’s $34.5 million profit, with operating profit also falling by 72 per cent to $16.9 million
  • EBITDA, net profit, and free cash flow declined compared to the first half of FY21, which Xero said is a result of higher expenditure in sales, marketing, and product development
  • Xero says it spent much of the first half investing in customer growth initiatives and announced today it would acquire LOCATE for US$19 million (A$26 million)
  • But, the loss appears to have spooked some investors as XRO shares are down 6.55 per cent during afternoon trade at $137.63 each

Xero (XRO) has shed close to $10 off its share price after the global payroll and accounting business posted a $5.9 million net loss in 1H FY22.

The first half loss is a 117 per cent decrease to the previous year’s $34.5 million profit, with operating profit also falling by 72 per cent to $16.9 million.

The results have sent the cloud-based software company into free fall, with the XRO share price closing at just over $147 yesterday before opening under the $140 mark.

Along with the net loss, Xero’s earnings before interest, taxes, depreciation and amortisation (EBITDA) dropped by 19 per cent year-on-year to $98.1 million.

EBITDA, net profit, and free cash flow declined compared to the first half of FY21, which Xero said is a result of higher expenditure in sales, marketing, and product development.

The shift in these indicators indicates a greater emphasis on cost control in reaction to the first effects of COVID-19 in the previous comparable period, Xero explained in a statement.

The company reported more encouraging results in terms of its gross profit and operating revenue — both increased to $440.4 million and $505.7 million respectively during 1H FY22.

The ASX 200 lister explained it spent much of the first half investing in customer growth initiatives, including the acquisitions of Planday, Tickstar and Waddle.

It announced today it would spend US$19 million (A$26 million) to acquire the online inventory program LOCATE.

Commenting on the acquisition, Xero CEO Steve Vamos said it would help the company establish its presence in North America.

“We selected LOCATE as it has some of the most comprehensive inventory-accounting workflows in the US market,” he said.

“The LOCATE acquisition supports our strategic priority to grow the small business platform, strengthens our ecommerce offering and supports our growth opportunities in North America and globally as we strive to be the most insightful and trusted platform for small business.”

XRO shares were still down 6.55 per cent during afternoon trade at $137.63 each.

XRO by the numbers
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