Sharechat Logo

Xero quits developing in-house US payroll product, signs up with Gusto

Friday 20th July 2018

Text too small?

Xero has stopped developing a payroll product in the US and will instead team up with existing payroll services provider Gusto, integrating their respective platforms. 

The Wellington-based, ASX-listed company today said the decision to stop development will incur an impairment charge of $16.2 million in the first half of the March 2019 year, freeing up resources to work on payroll in other markets, where Xero already covers 1.25 million employees. Gusto already handles all aspects of payroll for small business owners across 50 US states, and Xero expects the tie-up will make its North American offering more attractive. 

"The strategic alliance with Gusto is an important step in the implementation of our US growth strategy," chief executive Steve Vamos said in a statement to the ASX. "This strategic alliance allows us to focus our investment in our payroll product and brings important financial benefits and more efficient deployment of our resources as we execute our growth strategy." 

In May, Xero closed in on reporting its maiden profit, with positive earnings before interest, tax, depreciation and amortisation. It's been focusing more closely on improving its efficiency, with wider gross margins coming from the cheaper hosting costs using Amazon Web Services. 

Xero went through a period of change in the 2018 year, with founder Rod Drury stepping back from the management of the company, replaced by former Microsoft Australia and New Zealand head Vamos, and de-listing from the NZX to take up a sole listing on the ASX, in a bid to boost global fund managers' ability to hold Xero as it heads towards profitability. 

The ASX-listed shares rose 1.8 percent to A$46.11 today. 

The integration of the platforms is expected to be completed by early 2019. 

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares fall as investor uncertainty weighs on exporters; F&P Health, A2 drop
NZ dollar drops below US68c on plan to up bank capital
Noel Leeming fined $200,000 for misleading consumers
Big four banks face stiffer capital requirements from RBNZ
Infratil signals A$50m investment in Canberra Data Centres
Govt provides $2.5 mln to develop Opotiki aquaculture
Labour co-ordinator role may alleviate kiwifruit labour shortage
NZ manufacturing activity chugs along in November
Australia's GWA lobs in $118M bid for Methven
Govt leaves door open for higher emissions price cap

IRG See IRG research reports