Xero Limited · ASX:XRO
Xero — Shareholder Meeting (August 2018)
39 slides from Xero's shareholder meeting presentation, Aug 16, 2018
Slide 1: Annual meeting 16 August 2018
For personal use only Annual meeting 16 AUGUST 2018 Hunt & Gather, Raglan, New Zealand
Slide 2: Important notice
Important notice For personal use only This presentation is given on 16 August 2018 on behalf of Xero Limited (Xero) (ASX:XRO) (Company number NZ 183 0488, AU ARBN 160 661 183) Information in this presentation: • is for general information purposes only, and is not an offer or invitation for subscri
Slide 3: Board of Directors
Graham Smith Chair of the Board Independent Non-Executive Director For personal use only Nominations Committee (Chair) Audit and Risk Management Committee Susan Peterson Bill Veghte Independent Non-Executive Director Independent Non-Executive Director People and Remuneration Committee (Chair) People
Slide 4: Agenda
Agenda Chair’s Financial CEO Q&A For personal use only address overview update Graham Smith Kirsty Godfrey-Billy Steve Vamos Chair of the Board Chief Accounting Officer Chief Executive Officer 4
Slide 5: Chair's address
Chair’s For personal use only address Graham Smith CHAIR OF THE BOARD Junk & Disorderly, Auckland, New Zealand
Slide 6: Executive remuneration objectives
Executive remuneration objectives For personal use only Differentiate and reward excellent performance, both in the short and long-term Enable Xero to attract and retain employees, and motivate them to achieve results with When reviewing integrity and fairness Xero’s executive remuneration Balance t
Slide 7: Executive remuneration structure
Executive remuneration structure For personal use only Xero’s executive remuneration for FY19 consists of the following components: • Annual salary Fixed remuneration • Retirement: Superannuation (AU), KiwiSaver (NZ), 401k (US) and pension (UK) Short-term incentive Long-term incentive • Deferred STI
Slide 8: CEO inclusion in evolved structure
CEO inclusion in evolved structure For personal use only • Steve Vamos, CEO, will be included in the evolved executive remuneration structure as detailed below: Short-term incentive Long-term incentive • Steve's incentive for FY19 will now include the • Steve will participate in the new executive bl
Slide 9: Resolutions
Resolutions For personal use only X BDO Australia, Brisbane, Australia
Slide 10: Resolution: Fixing the remuneration of the Auditor
RESOLUTION 1 For Fixing the 80,586,939 For personal use only remuneration of 99.37% the Auditor Against 420,246 That the Board is authorised to fix the remuneration of the auditor for the ensuing year 0.52% Discretionary 89,671* 0.11% * 58,163 of which are held by the Chair of the Meeting who intend
Slide 11: Resolution: Election of Dale Murray as a Director
RESOLUTION 2 For Election of Dale 81,008,124 For personal use only Murray as a Director 99.86% Against That Dale Murray, appointed by the Board as a Director on 13 18,987 April 2018, be elected as a 0.02% Director of Xero Limited Discretionary 93,718* 0.12% * 58,810 of which are held by the Chair of
Slide 12: Resolution: Re-election of Rod Drury
RESOLUTION 3 For Re-election of Rod 81,042,764 For personal use only Drury as a Director 99.89% Against That Rod Drury, retiring from office as a Director of Xero 2,941 Limited by rotation, be re-elected 0.00% as a Director of Xero Limited Discretionary 89,946* 0.10% * 53,038 of which are held by th
Slide 13: Resolution: Re-election of Craig Winkler
RESOLUTION 4 For Re-election of Craig 67,012,647 For personal use only Winkler as a Director 82.60% Against That Craig Winkler, retiring from office as a Director of Xero 1,021,132 Limited by rotation, be re-elected 1.26% as a Director of Xero Limited Discretionary 13,096,939* 16.14% * 13,062,531 of
Slide 14: Resolution: Re-election of Graham Smith
RESOLUTION 5 For Re-election of Graham 79,686,064 For personal use only Smith as a Director 98.22% Against That Graham Smith, retiring from office as a Director of Xero 1,338,712 Limited by rotation, be re-elected 1.65% as a Director of Xero Limited Discretionary 102,448* 0.13% * 67,140 of which are
Slide 15: Resolution 6(a): Share issue to Lee Hatton
RESOLUTION 6(a) For Approval of the issue 80,600,839 For personal use only of shares to Directors 99.36% - Lee Hatton Against 421,419 That for the purposes of ASX Listing Rule 10.11, and for all other purposes, approval is given for 0.52% Xero to issue shares to Lee Hatton in lieu of her remuneratio
Slide 16: Resolution 6(b): Share issue to Bill Veghte
RESOLUTION 6(b) For Approval of the issue 80,665,499 For personal use only of shares to Directors 99.44% - Bill Veghte Against 357,449 That for the purposes of ASX Listing Rule 10.11, and for all other purposes, approval is given for 0.44% Xero to issue shares to Bill Veghte in lieu of his remunerat
Slide 17: Resolution: Adoption of new Constitution
RESOLUTION 7 (SPECIAL RESOLUTION) For Adoption of new 81,014,352 For personal use only Constitution 99.87% Against That Xero’s current constitution be revoked and Xero adopt the new Constitution tabled at 9,024 the Meeting in its place, with effect from the 0.01% close of the Meeting or any adjournm
Slide 18: Financial overview
Financial For personal use only overview Kirsty Godfrey-Billy CHIEF ACCOUNTING OFFICER X SMTAX, Cape Town, South Africa
Slide 19: Positive EBITDA with continued growth
Positive EBITDA with continued growth For personal use only POSITIVE EBITDA AMRR 1 SUBSCRIBERS OPERATING REVENUE OPERATING CASH FLOW $ 484.4m 1.4m $ 26.0m 406.6 m $ $ 41.2m + 33% YOY + 351,000 YOY + 38% YOY +46m YOY + $55m YOY 1 See the Glossary on page 38 for details on annualised monthly recurring
Slide 20: Strong top-line and bottom-line performance
Strong top-line and bottom-line performance For personal use only Xero subscriber growth Cash outflow1 as % of revenue 0% FY15 FY16 FY17 FY18 351,000 added in 12 months -20% 1,386,000 -40% subscribers -60% (71%) to (9%) in 3 years Mar 07 Mar 18 -80% 1 Operating and investing cash flows 20
Slide 21: Annualised monthly recurring revenue
$ 121m For personal use only added in 12 months $ 484m Annualised monthly recurring revenue Mar 11 Mar 18 21
Slide 22: Increasing total group subscriber lifetime value
Increasing Total group subscriber lifetime value (LTV) lifetime value For personal use only March 2018 Progress from $ 990m March 2017 ( 1.0b in CC ) $ 2 added in 12 months ARPU $29.13 MRR churn % 1.10% $ 3.2b Gross margin 81% LTV per subscriber1 $2,310 +9%2 $ 2.2b 1 Increased 8% YOY in nominal term
Slide 23: Positive EBITDA margin
Positive EBITDA margin EBITDA For personal use only 15% First positive EBITDA for the full-year driven by operating efficiencies across the business 6% EBITDA excl. SBP1 was $43.0m in FY18, an improvement of $59.9m YOY from $(16.9m) 0% loss in FY17 -15% -30% FY16 FY17 FY18 EBITDA EBITDA excl. SBP1 1
Slide 24: Positive operating cash flow
Positive Operating cash flow operating For personal use only $50m $ 41m cash flow $25m Positive operating cash flow of $41.2m for FY18, an improvement of $45.6m from $(4.4m) in FY17 Operating and investing cash flows as a % of revenue improved to 9% in FY18. Total operating $0m and investing cash fl
Slide 25: Beauty of Xero's SaaS model
Beauty of Xero's SaaS model For personal use only Acquire Grow Generate subscribers Grow gross Retention at revenue per long-term economically margins scale subscriber value at scale 25
Slide 26: New accounting standards
New accounting standards For personal use only Xero has adopted the following three accounting standards from 1 April 2018: IFRS 15 IFRS 16 IFRS 9 Revenue from contracts with Leases Financial instruments customers • Xero’s commission costs will • The majority of Xero’s leases • Amends the classifica
Slide 27: CEO update
CEO For personal use only update Steve Vamos CHIEF EXECUTIVE OFFICER Lagom, Bristol, United Kingdom
Slide 28: Xero's mission to rewire the global economy
Win with Great accountants people and For personal use only and teams bookkeepers Xero’s mission is to rewire the global Beautiful products economy, connecting Grow into and global millions of new spaces and places platform businesses to their banks, advisors and each other Love and Build to protect
Slide 29: Continued focus
Continued focus For personal use only Alignment of execution with strategy Global and regional operating model Great product management Capital investment framework 29
Slide 30: Driving adoption of cloud accounting
Driving adoption of cloud accounting For personal use only Accountants Small and businesses Bookkeepers Growth drivers Existing markets New markets Adjacent products 30
Slide 31: Strengthening Xero's global footprint
Strengthening Xero’s global footprint For personal use only Subscribers at 31 March 2018 Cloud 301,000 583,000 312,000 132,000 58,000 New Zealand Australia United Kingdom North America Rest of World TAM potential in a large global underserved market1 Leading cloud accounting platform 1 Estimated Eng
Slide 32: Grow small business platform revenues
Grow small business platform revenues For personal use only Suppliers App ecosystem Financial Customers institutions Accountants Small Employees and Government businesses Bookkeepers Growth drivers Finweb Transactional Data-driven revenues solutions 32
Slide 33: Growing the small business platform
Growing the small business platform For personal use only 94% Revenue Revenue composition growth YOY Group operating revenue 50% $406.6m 37% 38% 29% Group operating Core accounting revenue growth Platform revenues1 93% WorkflowMax2 Non-recurring3 Core Platform WorkflowMax2 Non- 3% accounting revenue
Slide 34: Acquisition of Hubdoc
Acquisition of Hubdoc Leading data capture solution For personal use only Significant step towards Enhances Xero’s platform code-free accounting strategy 34
Slide 35: Outlook
Outlook For personal use only Xero will continue to focus on growing its global small business platform Cash outflow1 in FY19 is forecast to reduce from FY18. Xero is managing the business to cash flow break-even within its current cash balance, without drawing on its debt facility, excluding capita
Slide 36: Q&A
Q&A For personal use only X RBK Advisory, Melbourne, Australia
Slide 37: Appendix
Appendix For personal use only X 37 Rec Room, Berkeley, California, USA
Slide 38: Glossary
Glossary For personal use only Subscribers Total lifetime value Subscriber means each unique subscription to a Xero-offered LTV is the gross margin expected from a subscriber over the lifetime of that product that is purchased by an accounting partner or an end subscriber. This is calculated by taki
Slide 39: www.xero.com/investors
For personal use only www.xero.com/investors