Xero must be so happy... and so sad after seeing such conflicting developments.
๐ Background: Xero is a New Zealand based tech company that helps small and medium businesses with their accounting and payroll stuff. It was founded in 2006 and listed on the ASX back in 2018.
๐ What happened: Xero just revealed its operating revenue rose an impressive 29% to $NZ1.1 billion for the year to March 31. That's building on 18% growth this time last year ๐ค. Buut its share price tanked 12% on the news.
๐ What else: Shareholders didn't love that Xero's costs also soared, particularly across marketing, product design and dev. The result? Xero's cashflow actually tanked by more than $50 mil! Makes a lil more sense now.
๐ก When it comes to businesses, there are two major strategies: growth or profit. It's a fine line to straddle, so most tech businesses need to choose one.
๐ก You're either in a rapid growth phase to acquire customers and get market penetration, or you're in the maximising profit phase - with less focus on growth and marketing and more focus on pricing. It's rare to see both simultaneously.
๐กXero has continued to choose growth, despite being a 16-year-old business. Many investors are ready to start seeing Xero's cash profits stack up, but the company sees sustainable growth as the ultimate outcome.
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