Xero Limited · ASX:XRO
Xero — Investor Presentation (November 2022)
37 slides from Xero's investor presentation, Nov 10, 2022
Slide 1: H1 FY23 Interim Results Investor Presentation
MARKET RELEASE H1 FY23 Interim Results Investor Presentation WELLINGTON, 10 November 2022 - Xero Limited (ASX: XRO), in accordance with the ASX Listing Rules, attaches its H1 FY23 Interim Results Investor Presentation. Authorised for release to the ASX by the Chair of the Board & Chair of the Audit
Slide 2: Investor briefing
Investor briefing Half year results to 30 September 2022 10 NOVEMBER 2022
Slide 3: Important notice
Important notice This presentation is given 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 • includes statements relating to past performance, which shou
Slide 4: Agenda
Agenda 01 02 03 04 05 CEO succession Business update Financial results Outlook Q&A David Thodey AO Steve Vamos Kirsty Godfrey-Billy CHAIR CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER 3
Slide 5: CEO succession
CEO succession David Thodey AO CHAIR
Slide 6: Business update
Business update Steve Vamos CHIEF EXECUTIVE OFFICER
Slide 7: Strong growth momentum
Strong growth momentum • Continuing to deliver strong revenue growth and good progress on strategic priorities • Customers are increasingly using Xero to run their business and meet critical compliance needs • Xero’s high value proposition is needed more than ever in the current complex macroeconomi
Slide 8: Strong revenue growth demonstrates value of proposition
Strong revenue growth demonstrates value of proposition Financial and operating performance highlights for the half year ended 30 September 2022 SUBSCRIBERS ARPU AMRR TOTAL LIFETIME VALUE 3.496m $35.30 $1,480.9m $13.0b + 483,000 net subscriber + 13% YOY (6% in + 31% YOY (23% in + $3.1b or 30% YOY ad
Slide 9: SaaS metrics reflect consistent value creation
SaaS metrics reflect consistent value creation Total LTV over time • LTV 3 year CAGR was 32% for ANZ and 39% for International • Average subscriber lifetime of 9.2 years $3.1b added International $15b ANZ 13.0b 9.9b $10b ANZ International Group ARPU $35.6 $35.0 $35.3 6.2b 5.4b $5b Churn 0.66% 1.26%
Slide 10: Australia and New Zealand highlights
Australia and New Zealand highlights $378M REVENUE (+27% YOY, 23% YOY constant currency) Continued momentum in subscriber and revenue growth as accountants and bookkeepers drive further cloud adoption • Double digit growth in revenue and subscribers 2.01M SUBSCRIBERS (+17% YOY), 150K NET ADDITIONS •
Slide 11: International highlights
International highlights Positioned for the long term opportunity across our international segments $281M REVENUE (+34%YOY, 32% constant currency) • Well positioned delivering strong revenue growth and solid ARPU growth 1 • Continuing to progress our product roadmap announcing Xero Go in the UK and
Slide 12: Strong revenue growth from our portfolio of businesses
Strong revenue growth from our portfolio of businesses Customers increasingly use Xero to operate their business and meet fundamental compliance needs Revenue composition +30% YOY (27% cc) Core accounting $659m Platform +23% YOY Other (26% cc) • Group operating revenue 3% grew 30% YOY or 27% in cons
Slide 13: Platform engagement continues to grow
Platform engagement continues to grow Planday users 1 Employees paid through Total payment value 3 Xero Payroll 2 160 160 160 +40% YOY 140 +18% YOY 140 +21% YOY 140 Indexed to Sep-21 Indexed to Sep-21 Indexed to Sep-21 120 120 120 100 100 100 80 80 80 60 60 60 40 40 40 SEP 21 DEC 21 MAR 22 JUN 22 SE
Slide 14: Strategic priorities
Strategic priorities Drive cloud Grow small Build accounting business for global platform scale and innovation 13
Slide 15: Driving adoption of cloud accounting
Driving adoption of cloud accounting Adopting the cloud Leveraging the cloud United Kingdom North America Rest of World Australia New Zealand H1 FY23 Δ YOY H1 FY23 Δ YOY H1 FY23 Δ YOY H1 FY23 Δ YOY H1 FY23 Δ YOY Subscribers 894k +14% 354k +15% 242k +20% 1.47m +19% 536k +12% TAM: 45m1 5.5m 34.5m 1.3m
Slide 16: Grow the small business platform: an open platform and ecosystem
Grow the small business platform: an open platform and ecosystem to address small businesses needs Xero is committed to being an open platform and No single vendor is likely to meet all encouraging third party innovation through our the needs of a small business ecosystem US Microbrewery UK Adventur
Slide 17: Grow the small business platform: an open platform and ecosystem
Grow the small business platform: an open platform and ecosystem to address small businesses needs Xero is committed to being an open platform No single vendor is likely to meet all We facilitate this in a number of ways and encouraging third party innovation through the needs of a small business in
Slide 18: Build for global scale and innovation: technology investment
Build for global scale and innovation: technology investment The next evolution of our technology investment is continuing our focus on: Further enabling our technical environment and data environments for EFFICIENCY AND global scale. Supporting greater change capacity as we localise our core SCALAB
Slide 19: Financial results
Financial results Kirsty Godfrey-Billy CHIEF FINANCIAL OFFICER 18
Slide 20: Robust financial performance with continued disciplined investment
Robust financial performance with continued disciplined investment for the long term AMRR EBITDA Free cash flow $1,480.9m COVID-19 $108.6m $1,500m $200m $80m COVID-19 $1,200m $1,132.5m +31% $150m $120.8m $60m +11% $900m $54.3m $15.6m $877.6m $100m $40m $600m $764.1m $98.1m $50m $ $20m $6.4m $300m 64
Slide 21: Continued uplift in lifetime value of subscribers
Continued uplift in lifetime value of subscribers LTV movements by driver Value of a Xero subscriber From 31 March to 30 September 2022 At 30 September 2022 $14b $4,000 0.76 0.21 13.0 $3,200 0.48 -0.06 -0.09 $12b $2,400 0.80 LTV per LTV/CAC sub 10.9 $1,600 6.9 $3,706 $10b $800 $0 CAC $540 $8b $-800
Slide 22: Higher ARPU, continued low churn
Higher ARPU, continued low churn ARPU movement contributors Churn 2 ARPU has increased by just over $3.90 since 31 March 2022 Churn has remained consistently below pre-COVID-19 pandemic levels ARPU at 31 March 2022 $31.4 1.40% Price changes 1.10% 1.13% 1.11% 1.15% 1.01% 0.91% Product mix and other1
Slide 23: Continued investment delivers gross profit growth
Continued investment delivers gross profit growth Gross profit and gross margin percentage Operating expenses as a % of revenue Gross profit Sales and marketing Gross profit Gross margin percentage Product design and development +30% YOY General and administration $573m $600m 100% 80.5% 83.4% 83.9%
Slide 24: Balancing cost discipline with long term investment
Balancing cost discipline with long term investment Sales & marketing General & administration Product design & as a % of revenue as a % of revenue development as a % of revenue 50% 35.0% 36.3% 15% 40% 12.5% +2.0pp 32% -1.1pp 13% -0.6pp 30% COVID-19 15% 10% 20% H1 FY19 H1 FY20 H1 FY21 H1 FY22 H1 FY2
Slide 25: Robust financial performance
Robust financial performance H1 FY22 H1 FY23 Δ YOY ($000s) ($000s) (%) Operating revenue growth of 30% YOY (27% constant currency), driven primarily by subscriber growth and ARPU Total operating revenue 505,703 658,512 30% Operating expenses increased 31% YOY and represented Cost of revenue (65,286)
Slide 26: Total liquid resources of $1.1 billion
Total liquid resources of $1.1 billion Total available liquid resources at 30 September 2022 Movement in net cash position of $1.1 billion H1 FY22 H1 FY23 Δ YOY Improved positive free cash flow outcome reflects ($000s) ($000s) ($000s) emerging efficiencies Cash and 470,065 395,092 (74,973) cash equi
Slide 27: Outlook
Outlook Xero will continue to focus on growing its global small business platform and maintain a preference for reinvesting cash generated, subject to investment criteria and market conditions, to drive long-term shareholder value. Total operating expenses (including acquisition integration costs) a
Slide 28: Evolution of Xero's financial profile
Evolution of Xero’s financial profile LONG TERM EXPENSE RATIO H1 FY23 FY22 FY23 EXPECTATION ASPIRATION UNCHANGED SALES & MARKETING 36.3% 37.0% Ç Expected ratio trend vs FY22: of revenue of revenue OUTCOME • Revenue Growth: +30% • Revenue Growth • Subscriber Growth: +16% • Subscriber Growth • LTV/CAC
Slide 29: Q&A
Q&A Steve Vamos CHIEF EXECUTIVE OFFICER Kirsty Godfrey-Billy CHIEF FINANCIAL OFFICER
Slide 30: Appendix
Appendix 29
Slide 31: Subscriber growth trend
Subscriber growth trend Closing subscribers from H1 FY20 to H1 FY23 +16% +19% +23% 3.50m Australia 3.27m +20% New Zealand 3.01m 242k +19% 2.74m 226k +26% United Kingdom 354k +30% 2.45m 201k North America 2.29m 175k 339k 894k 308k 2.06m 136k 850k Rest of World 285k 785k 125k 99k 251k 720k 241k 638k 5
Slide 32: SaaS metrics summary
SaaS metrics summary ANZ International Group FY21 H1 FY22 FY22 H1 FY23 FY 21 H1 FY22 FY22 H1 FY23 FY21 H1 FY22 FY22 H1 FY23 ARPU $31.23 $31.38 $32.00 $35.56 $26.74 $31.25 $30.53 $34.95 $29.30 $31.32 $31.36 $35.30 CAC months 8.9 9.1 8.8 8.7 22.4 19.5 22.9 22.8 14.8 14.2 15.5 15.3 Churn 0.73% 0.67% 0.
Slide 33: Financial performance
Financial H1 FY21 H2 FY21 H1 FY22 H2 FY22 H1 FY23 performance ($000s) ($000s) ($000s) ($000s) ($000s) Total operating revenue 409,837 438,945 505,703 591,116 658,512 Gross profit 351,161 378,728 440,417 517,014 572,912 Overview of financial Gross margin 85.7% 86.3% 87.1% 87.5% 87.0% performance from
Slide 34: Exchange rates
Exchange rates The table below outlines the principal exchange rates used in the current and prior period Six months ended/ as at 30 September 2022 2021 Average rate Closing rate Average rate Closing rate NZD / AUD 0.904 0.880 0.941 0.956 NZD / CAD 0.815 0.782 0.880 0.876 NZD / EUR 0.610 0.582 0.594
Slide 35: Glossary
Glossary AMRR Constant currency (cc) Liquid resources Annualised monthly recurring revenue (AMRR) represents Constant currency comparisons for revenue are based on average Liquid resources comprises cash and cash equivalents, short- monthly recurring revenue at 30 September, multiplied by 12. exchan
Slide 36: Contact
Contact Nicole Mehalski Kate McLaughlin INVESTOR RELATIONS COMMUNICATIONS nicole.mehalski@xero.com kate.mclaughlin@xero.com +61 400 947 145 +64 27 533 4529 35
Slide 37: Beautiful business
Beautiful business xero.com/investors