Xero Limited · ASX:XRO
Xero — Investor Presentation (November 2013)
50 slides from Xero's investor presentation, Nov 26, 2013
Slide 1: Xero Investor Update November 2013
Xero Investor For personal use only update November 2013
Slide 2: Important notice
Important notice For personal use only This presentation is given on behalf of Xero Limited (Company number NZ 1830488, AU ARBN 160661183 NZX/ASX:XRO). Information in this presentation: • is for general information purposes only, and is not an offer or invitation for subscription, purchase, or recom
Slide 3: FY 2014 first half year
FY 2014 first half year For personal use only 6 months to 6 months to Increase September 2013 September 2012 Operating revenue $30.3m $16.5m 84% Total revenue & grant income $31.0m $16.9m 83% Operating expenses $(44.6)m $(22.7)m 96% EBITDA $(13.6)m $(5.8)m 134% Net loss after tax $(17.1)m $(7.0)m 14
Slide 4: Growth trajectory continues
Growth trajectory continues For personal use only $80,000,000 300,000 $60,000,000 225,000 ACMR (NZ$m) $40,000,000 150,000 $20,000,000 75,000 Sep 08 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 ACMR Customer Numbers 4
Slide 5: SaaS - investing to drive high growth
SaaS - investing to drive high growth For personal use only 250% Salesforce 200% Xero 160% 200% 400% 250% Operating Costs % of Revenue 120% 150% Revenue Growth 80% Rate 350% 100% 200% Operating costs % of Revenue 300% 40% 50% 0% 0% $749 $1,077 $1,306 $1,657 $2,267 $3,050 250% $22 $51 $96 $176 $310 $
Slide 6: Country customer growth
Country customer growth For personal use only Customers at Customers at % total small 30 Sep 2013 30 Sep 2012 Growth businesses NZ 85,500 57,300 49% 19% AU 79,100 32,500 143% 4% UK 30,100 15,100 99% <1% US/RoW 16,600 6,900 141% <1% Total 211,300 111,800 +89% 6
Slide 7: Country operating revenue growth
Country operating revenue growth For personal use only 6 months to 6 months to Sep 2013 Sep 2012 Growth NZ $10.8m $7.3m 48% AU $12.3m $5.5m 124% UK $4.4m $2.4m 83% US/RoW $2.8m $1.3m 115% Total $30.3m $16.5m 84% 7
Slide 8: Country ACMR growth
Country ACMR growth For personal use only ACMR at ACMR at Sep 2013 Sep 2012 Growth NZ $23.9m $16.3m 47% AU $30.2m $14.3m 111% UK $10.2m $5.4m 89% US/RoW $6.3m $2.7m 133% Total $70.6m $38.7m 82% 8
Slide 9: Country contribution
Country contribution For personal use only Negative Positive $2.6m NZ $5.3m $0.3m AU -$0.2m $0.3m UK $0.3m -$1.0m ROW/USA -$6.0m Country costs include sales and marketing costs and service delivery costs including both in- 2012 2013 country and allocation of centrally managed costs. (Page 11 Interim
Slide 10: Business highlights
Business highlights For personal use only Accounting partners Availability 8,800 CY99.97 (Nov 2012, 4,600) (Last 6 months 99.999) Add-ons apps Staff 300 584 (Nov 2012, 220) (Nov 2012, 278) 10
Slide 11: Capital raise
Capital raise For personal use only • Raised $180m of new capital on 14 October 2013. • Range of US and NZ investors including existing shareholders Matrix Capital Management and Peter Thiel backed Valar Ventures. • US investors accounted for $147 million of the raise. • Priced at $18.15 per share f
Slide 12: Capital
Capital For personal use only Placements Date Pre IPO $2.0m - IPO $15.0m Jul 2007 Craig Winkler (MYOB founder) $18.0m May 2009 Private placement $5.0m May 2009 SPP $6.0m May 2009 Valar Ventures (Peter Thiel) $4.0m Oct 2010 Valar Ventures, Sam Morgan, Sam Knowles $20.0m Feb 2012 & Craig Winkler, Inst
Slide 13: Allocating resources
Allocating resources For personal use only Investment principles Invest to deliver long term growth Recruit global management Success talent to grow each team Allocations from: +80%–100% Investment levels based growth YoY ACMR $75m on countries GTM stage Cash $230m Broad product portfolio to win New
Slide 14: Investment in people
Investment in people 249 staff hired from 1 Jan 2013 - 30 Sep 2013 For personal use only Marketing 22 Product development Sales, enablement 64 72 & training 20 Finance, legal, HR, facilities, internal IT 23 48 Customer Platform experience 14
Slide 15: Positioning for new products: US price changes
Positioning for new products For personal use only US price changes 15
Slide 16: Go to market
For personal use only update Go to market
Slide 17: Partner channel is key
Partner channel is key For personal use only 28% 46% 54% 72% Customers by channel Revenue by channel for 6 as at 30 Sep 2013 months to 30 Sep 2013 Direct Partner Direct Partner 17
Slide 18: Xero platform
For personal use only 18 Xero platform
Slide 19: Partners – lead growth indicator
Partners – lead growth indicator For personal use only 9,000 6,750 Channel partners 4,500 2,250 NZ AU UK US/ROW Total Sep 12 Sep 13 19
Slide 20: New Zealand
New Zealand For personal use only Channel partners Growth accelerators 2,400 1. Inventory (stock) including support for farming 1,800 2. Full release of our V2 reporting 1,200 framework for accountants 3. Practice Studio features required to 600 switch out incumbent products 4.Tier 1 and 2 accountin
Slide 21: Australia
Australia For personal use only Channel partners Growth accelerators 4,500 1. Build on current execution 2. Continue brand awareness 3,375 marketing campaign 2,250 3. Focus on roadshows and partner adoption 1,125 4.Practice Studio features required to switch out incumbent products Sep 12 Sep 13 5. E
Slide 22: UK
UK For personal use only Channel partners 1,500 Growth accelerators Accountants now ready for adoption 1,125 of SaaS 750 1. Now recognized as the cloud leader 2. UK payroll 375 3. Extend sales presence across UK and increase market awareness Sep 12 Sep 13 Xero is now the leading online accounting pr
Slide 23: Cloud tipping point in the UK
Cloud tipping point in the UK For personal use only Using cloud now Intending to move No plans to move to cloud 28% 27% 72% 45% Independent research commissioned by Xero involving a survey of 250 UK accounting practices in September 2013 23
Slide 24: UK practices working online
UK practices working online For personal use only 724 532 FreeAgent 29 161 e-conomic 181 Clearbooks 21 98 Sage One 82 Certified practices Uncertified practices Figures obtained from each vendor’s public directory and Xero as at August 2013 24
Slide 25: US/ROW
US/ROW For personal use only Channel partners Growth accelerators 1,200 1. US payroll release 900 2. New pricing and ARPU uplift 3. Magnify market awareness 600 4.Education led growth of the 300 partner channel 5. Expansion of GTM outside California 6.Alliances with cloud leaders Sep 12 Sep 13 US st
Slide 26: FY14 Outlook
FY14 Outlook For personal use only • Revenue growth over 80% • Continuing strong investment will lead to increased operating losses for the second half period: - Increased product development capability - Continued recruitment of senior leadership - Accelerated expansion in UK and continued US inves
Slide 27: Leaders emerge
For personal use only emerge Leaders
Slide 28: Cloud disrupts small business
Cloud disrupts small business For personal use only Move from • Small business is a giant market. nothing • Accounting is at the heart of small Addressable market expands Move to online/mobile business software. Move from Cloud • Cloud creates a single global paper market accessible by over 500 Move
Slide 29: Market observations
Market observations For personal use only Incumbents App providers Intuit, Sage, MYOB Young, small, underfunded Enterprise software experienced Desktop software a different entrepreneurial management, $200m+ cash business, have been operating at Dropping away, acquired or being maturity for some yea
Slide 30: Barriers to entry
Barriers to entry For personal use only Incumbents Desktop business Slow ecosystem Legacy Code Old processes Legacy Relationships Rigid culture Talent attraction Accountant tools $200m for a platform Capital required Hard to build Freemium trap Ability to scale Experience ecosystem Startups 30
Slide 31: First cloud native to scale revenue
First cloud native to scale revenue For personal use only Intuit Accounting Revenue Small Business SaaS MYOB Freshbooks? Sage Reckon Wave Incumbents Pure cloud 31
Slide 32: Customer additions per month
For personal use only Customer additions per month (000) 4 8 11 15 Oct 03 Apr 04 Oct 04 Apr 05 Oct 05 Apr 06 Oct 06 Apr 07 QuickBooks Online Oct 07 Apr 08 32 Oct 08 Apr 09 Oct 09 Sage One Sources: Publicly available company reports Apr 10 Oct 10 Cloud adoption Apr 11 Xero Oct 11 Apr 12 Oct 12 Apr 13
Slide 33: Executing to win
Executing to win For personal use only What we’ve done What we’re doing Frequent major releases Build the best global team (Files, Purchase orders, US payroll) Continued wall of new innovations Resourced UK and US growth engines Extending sales focus across US and UK Building high energy culture Ext
Slide 34: Moving the product category
Moving the product category For personal use only Single Code Base Seamless files Expense claims Fixed assets Online Categorization engine Convert for free Accounting Unlimited users Collaboration 300 add-ons Seamless payroll Quickbooks Online Xero 34
Slide 35: Intuit payroll – day down time
Intuit payroll – 4 day down time For personal use only 35
Slide 36: Xero best-in-class
Xero best-in-class For personal use only Data security Uptime Never a breach nor data loss Availability and performance Private cloud platform with are key to service frequent backups (99.97% CY2013) Data ownership Data portability You own the data, we are Monthly subscription the stewards of it wit
Slide 37: Intuit API – multiple attempts
Intuit API – multiple attempts For personal use only • Intuit Partner Platform “Every one page of • ~55 add-ons documentation at Xero is like ten pages for • Plays favorites QuickBooks” • Work with a select few and go deep • Documentation complex “For every one end-point • 2 platforms (QBO and QBD)
Slide 38: Xero API energizes the ecosystem
Xero API energizes the ecosystem For personal use only Acquire customers Open reliable API on with via network effects, and which to grow your business address larger businesses Expert talented Smiling mutual customers team and support that don’t churn 300 and growing network of No fees and strong g
Slide 39: Beautifully integrated payroll
Beautifully integrated payroll For personal use only 39
Slide 40: Payroll becomes fast, reliable and mobile
Payroll becomes fast, For personal use only reliable and mobile. @RealTimeAccing 40
Slide 41: Incredibly well positioned
Incredibly well positioned For personal use only Uniquely placed Pulling away • Immense upside in our addressable • Best in class delivery cadence, global market and platform adoption proven operational excellence • Absence of effective product • Expanding network effect of users, partners and add-o
Slide 42: Thanks for attending today. Questions?
Thanks for For personal use only attending today. Questions? 42
Slide 43: Appendix 1. Platform for growth
Appendix 1. For personal use only Platform for growth
Slide 44: Xero platform
For personal use only Xero platform 44
Slide 45: The single ledger
The single ledger For personal use only A single copy of financial data and documents in the worlds most advanced double-entry accounting engine 45
Slide 46: Online accounting
For personal use only Online accounting 46
Slide 47: Practice Studio
Practice Studio For personal use only REPORTING PRACTICE MANAGEMENT TAX WORKPAPERS Xero delivers the dream of client, accountant and bookkeeper tools on a single platform. 47
Slide 48: Modern Practice
Modern Practice For personal use only DOCUMENT MANAGEMENT OFFICE & EMAIL MARKETING TOOLS CONTENT TEMPLATES 48
Slide 49: Connected services
Connected services For personal use only Our goal is to have the richest, most active and high quality network of SaaS applications for small business. From the global internet giants to the latest niche solution. 49
Slide 50: Xero's cloud engine
Xero’s cloud engine For personal use only Beautiful design Accounting, workflow API & collaboration features Global, double entry, accounting engine Industry relational data model Business intelligence Multi-tenant, multi-shard, global architecture Scalable, secure, resilient and global infrastructu