Liddell bullish on Xero's US growth prospects

Xero CEO Rod Drury.

Xero has a decade of expansion ahead and the problem won't be finding areas for the accounting software maker to grow but choosing which of these to take, says chairman Chris Liddell.

In the United States - where Liddell lives - he says there are 30 million small-to-medium sized business which Xero can vie for.

"Just having those people come online and use cloud-based services, I can see five to 10 years' growth just in that and then you talk about all the add-ons to [Xero's] core product and we have a whole other growth phase," Liddell said after the company's annual meeting in Wellington this week.

Liddell, an expatriate New Zealander who has previously held top positions at Microsoft and General Motors, joined Xero's board in February and said he brings a "US perspective" to the company.

According to New York-based Liddell, "being there" helps strategise how the company will tackle the United States market.

Part of this US playbook could be a stock exchange listing there, which was flagged by both Liddell and Xero chief executive Rod Drury at the meeting on Wednesday afternoon.

Liddell, in his address to investors at the annual meeting, said a US listing was a "logical step" and a "significant milestone in becoming a truly global company".

While Xero is active in four main markets - New Zealand, Australia, the United Kingdom and the United States - its North American prospects are what are laboured over and scrutinised.

Drury says the company is "really focused on" that part of the world, which made up only 6 per cent of its customer base as at March 31 this year.

He would not give numbers updating the company's US progress in this financial year, nor its predictions for growth in that market.

Investors, however, should "not expect too much over the next few years", he said.

"It's a long game ... we've got a plan for the US, we've got more product to build and we're building a team and it will get interesting over the next few years," he said. "We are the leader outside the US which is an incredibly powerful position to be in as we enter the US market."

Is there a "plan B" if the US doesn't go how the company wants?

"We don't need a plan B because we've got a solid business across all other geographies but we don't see any scenario where we don't grab significant market share in the US," he said.

Drury, as usual, was dismissive this week of Xero's massive US rival Intuit.

That company - which recorded revenue of US$4.2 billion last year - was adding more online customers each month than Xero, based on a graph Drury tabled as part of Wednesday's meeting.

Drury said this wasn't Intuit getting new business but flipping its desktop software customers online.

Xero, on the other hand, was growing as a "new entrant with no brand", he said.

The potential US listing, according to Drury, would help with building that brand.

And while the listing is not in line for this financial year, during the current reporting period Xero will break through US$100 million in annualised committed monthly revenue, positioning it for a US listing when and if it chooses to.

Although capital raising won't be the primary focus in Xero's US listing, Liddell said the company will raise more money as it needs to.

The company, as at March 31, had $210 million cash on hand to fund its present growth - its stockpile bolstered by a $180 million raising from mainly US investors last October.

"We've got people we're turning away, it's all about making sure we raise capital in the right way and build a shareholder base that wants to stick with us," Liddell said.

Xero shares advanced 5.7 per cent yesterday to $25.90. The stock has gained 9.8 per cent since its annual general meeting on Wednesday.