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The company reported strong growth in its preliminary release of financial data for the 2019 fiscal year, but its earnings are weighed down by an intense cash burn to help it meet new demand for its products abroad.
Serko’s total operating revenue rose 28 percent in the last financial year and grew travel bookings by 17 percent year-over-year. While the company boasted strong recurring product revenue of $20.7 million nzd ($13.5 million), a 26 percent jump, it only posted $1.6 million nzd ($1 million) in profit after tax.
A major factor that limited profit was increased investment in research and development, which totaled an 87 percent year-over-year increase, along with a 32 percent surge in operating expenses at the same time. The company grew from 106 employees to 173 over the last year, as the company staffs up to improve its products and better sell into international markets.
Despite burning through cash, the outlook for Serko remains strong as it grows in order to meet the demands of new clients around the world.
“Demand for Zeno in North America has exceeded our in-house capacity to deliver,” said Serko chairman Simon Botherway in a release. “In response, we have boosted our resourcing and prioritized development as we configure Zeno to meet the operational and marketing needs of these customers… Our expanded team and the use of contractors will result in the progressive delivery of the commercial Zeno rollout in the U.S., commencing early in the second half of the 2020 financial year. This investment will result in another year of cash burn; however this is an extraordinary level of investment, which is subsequently expected to normalize in the 2021 financial year.
Serko now offers its Zeno booking tools through companies like CWT, ATPI, and Direct Travel. It acquired Interplx, an expense software provider, in early January for a reasonable price. It also maintains a strong presence in the Australian corporate travel market, providing services to travel companies like Flight Centre and Corporate Travel Management.
Serko’s 2019 financial outcome was much the same as it was in 2018, but 2020 will likely prove a pivotal year for the company as the effects of its international growth strategy come into view.