Xero reverts into loss-making territory in FY22: Expenses match revenue growth

Thu 12 May 22, 11:19am (AEST)
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Key Points

  • Xero delivers solid top line growth in FY22, up 29% to $1.096bn
  • Operating expenses were going up just as fast as the top line
  • The business reported a net loss of -$9.1m compared to $19.8m in FY21

FY22 results were a tough sell for Xero (ASX: XRO) as the business dug deep into its pockets to maintain a solid top line growth trajectory.

Xero shares dipped -6.3% ($81.52) as the market opened, down to a 2-year low.

Results at a glance


  • Operating revenue of $1.096bn, up 29%

  • Gross profit of $957m, up 31%

  • Earnings of $212.6m, up 11%

  • Net loss of -$9.1m compared to $19.8m profit a year ago

  • Free cash flow of $2.07m compared to $56.9m a year ago


  • Subscriber base of 3.27m, up 19%

  • Net subscriber additions of 530,000, up 16%

  • Average revenue per use of $31.37, up 7%

Solid results, wrong market

The last thing investors want to hear amid a rising interest rate environment and preference for strong cash flow businesses is a net loss and rising expenses.

Total operating expenses as a percentage of operating revenue was 84.0%, flat compared to last year.

However, given the 29% increase in operating revenue, it meant that costs were going up just as fast as the top line. Notable cost drivers include:

  • Full-time equivalent employees increased to 4,784, up 31%

  • Sales and marketing costs of $405.7m, up 32%

  • Product design and development expenses of $372m, up 49%

Positive takeaways

There are a few positive takeaways from the tech market darling.

Xero's customer base is close to 3.3m and the average revenue per user (ARPU) rose 7% to $31.36.

The total lifetime value of subscribers rose 43% to $10.9bn thanks to factors including higher ARPU, favourable product mix and the value-add of recent acquisitions like Planday, Tickstar, TaxCycle and LOCATE Inventory.

Though, any positives were outweighed by the narrative of paying for growth and swinging back into net loss territory.

It doesn't help that the Nasdaq was down -3% overnight, with several fintech names like Affirm, Block and Coinbase down more than -15%.


Xero said it expects total operating expenses as a percentage of operating revenue for FY23 to be towards the lower end of the 80-85% range.

2022-05-12 10 34 18-Xero Ltd (ASX XRO) Share Price - Market Index
Xero 12-month price chart


Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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