Some Xero shareholders took the opportunity to make some profit on their investments after the market darling reported a loss of $17.1 million for the six months ended September.
Xero's share price had been on an upward trajectory before it stabilised at around $35 after reaching a peak of more than $37. The shares traded down nearly 8% at $33 after the announcement. On January 3, the share price was $7.48.
The company, which is pushing into the United States, provides online accounting and is regarded as the market leader in New Zealand, Australia and the United Kingdom.
Xero's NZX announcement showed its revenue increased to $30.3 million in the period, compared with $16.5 million in the previous corresponding period.
The loss at the same time last year was $7 million.
Cash in the bank increased 81% to $55.3 million and annualised monthly committed revenue increased to $70.6 million from $39.7 million.
Importantly, paying customers rose nearly 90% to 211,300 in the period.
Craigs Investment Partners broker Greg Easton noted the company had market capitalisation of $4.5 billion but with half-year revenue of $30.3 million.
Xero raised $180 million from technology investors to remove substantial risk from the business.
''They have to keep their product fresh and innovative. Xero is making a big investment into the United States, but they will have a fight on their hands.
There are some big companies with big balance sheets in the same space.
And there is always a 19-year-old in a garage somewhere who might come up with a better idea.
''That $180 million allows them a margin to buy the 19-year-old out. That's what Google does.''
Xero chief executive Rod Drury said the company expected to exceed 80% growth in operating revenue for the full year to March 2014 and continue to incur increased operating losses for the second six-month period as it continued to invest.
''With cash reserves at October 31 of $230 million, the board is continuing to follow a growth agenda focused on creating longer-term shareholder value rather than short-term profitability.
''Xero is investing in the platform to support millions of customers and create a significant cloud-based financial platform for its customers and partners.''
The company was focusing on building a business which would be highly profitable in the long term and that would involve further losses, Mr Drury said.
''Our track record and cash reserves put us in a very strong position to take on incumbent providers of desktop accounting software.''
The move to the cloud was well under way and Xero would invest heavily to expand the business in the best interests of shareholders, Mr Drury said.
Mr Easton said he wanted to see the bottom line turn into profit in the next couple of years.
Xero could cut sales and distribution staff numbers and probably get into profit now, but it was aiming to have one million customers buying its products and that meant continuing to sell into its key markets.
The share price was being driven by the marketing undertaken by Xero, but some investors had a dose of reality yesterday and sold to take some profit.
''This is a fantastic New Zealand story. The capital injection came from overseas investors.
The company is employing a few hundred people in Wellington, who are paid good wages. We want them to crack the US market,'' he said.
