Xero Users Feel Impact of Tight Labor Markets — Interview – Jahanagahi

Xero Users Feel Impact of Tight Labor Markets — Interview

By Stuart Condie

SYDNEY–Cloud-accounting software provider Xero Ltd.’s users are more concerned about a shortage of skilled labor than inflation or rising interest rates, Chief Executive Steve Vamos said.

New Zealand-based Xero increased staff by 31% over the 12 months through March but its employee costs rose by 34% against the backdrop of what it called a challenging hiring market. Mr. Vamos on Thursday said that at his recent meetings with so-called Xero partners in the US, Canada, the UK and Denmark had highlighted the same issue.

“If there was one theme that came back, it was about the challenge of getting access to talent,” Mr. Vamos told The Wall Street Journal in an interview. “That was the one thing that I think stood above the others.”

The impacts of rising inflation and tight labor market are visible in the company’s results. Xero’s general and administration costs, which include salaries, rose to 13.2% of operating revenue in the second half of its 2022 fiscal year. The figure has been above 13% for three consecutive half-year periods and Xero expects it to remain at that level in FY 2023.

Product development and design costs represented a record 33.9% of revenue over the 12 months through March, a ratio that Xero also expects to remain constant in FY 2023. It aims to reduce its overall FY 2023 operating costs by lowering sales and marketing costs, which accounted for 37.0% of FY 2022 revenue.

Mr. Vamos said Xero, which had 3.27 million subscribers at the end of March, estimated a total addressable cloud-accounting market of more than 45 million small businesses in the countries in which it already operates.

Group revenue jumped 29% in FY 2022 to 1.10 billion New Zealand dollars (US$692.5 million). Xero pushed through price rises in the last fiscal year but won’t contemplate linking future rises to inflation, he said.

“To make a direct link at any point in time is to simplify the nature of what we’re talking about,” he said. “We would take a more considered approach.”

Write to Stuart Condie at [email protected]


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