Xero Limited · ASX:XRO
Xero — Investor Presentation (February 2016)
36 slides from Xero's investor presentation, Feb 11, 2016
Slide 1: Analyst Briefing Xero Limited
Analyst Briefing Xero Limited Rod Drury - CEO Ross Jenkins - CFO Chris Ridd - MD Australia (Melbourne 6 Dec 2012 and Sydney 7 December 2012)
Slide 2: Disclaimer
Disclaimer This presentation dated 3 December 2012 provides additional comment on the market release of 14 November 2012 and the Half-Year Report. As such, it should be read in conjunction with, and subject to, the explanations and views in those documents. This presentation includes forward looking
Slide 3: Contents
Contents 1. Business overview 2. Market observations 3. Growth strategy 4. Half year results and outlook 5. Questions 3
Slide 4: 1. Business overview
1. Business overview 4
Slide 5: Accounting is killer app for small business
Accounting is killer app for small business Big market, experiencing disruption Traditionally the small businesses market has been too fragmented to sell into: • Millions of small businesses = multi-billion dollar market • Untapped – of the global software companies (including IBM, Oracle, SAP, HP)
Slide 6: Positioning
Positioning Consumer Small business Enterprise Non direct monetization Direct monetization High price Low price Expensive sales model Smart sales model Complex applications focussed on usability Small business is a big, monetizable, internet opportunity 6
Slide 7: Cloud Investment landscape (USD)
Cloud Investment landscape (USD) Salesforce $19b Intuit $17b te i v a Workday Inc $7.5b Pr l ic Success Factors $3.4b (SAP) u b P Netsuite $4.2b Square $3.2b Yammer $1.2b (MSFT) Yelp $1.1b Box $1B $0.6b 7
Slide 8: Public company
Public company • Successful investment round in November 2012 XRO ASX • NZ$60 million of new capital • Transactions priced at the 20-day volume- weighted average price – NZ$6.00 per share. • Matrix Capital Management is investing NZ$58 million and Valar Ventures NZ$24 million. • Their total investme
Slide 9: Capital
Capital Placement Date ($000’s) Pre IPO 2,000 IPO 15,000 Jul 2007 Craig Winkler (MYOB founder) 18,000 May 2009 Private placement 5,000 May 2009 SPP 6,000 May 2009 Valar Ventures (Peter Thiel) 4,000 Oct 2010 Valar Ventures, Sam Morgan, Sam Knowles & Craig Winkler, 20,000 Feb 2012 Institutions SPP 15,
Slide 10: Board structure
Board structure Rod Drury Sam Knowles CEO & Co-founder Non-Executive Chairman One of NZ's leading technology entrepreneurs 25 year career in Management & Financial Services Craig Winkler Craig Elliott Non-Executive Director Non-Executive Director Co-founder of MYOB Co-founder and CEO of Pertino Netw
Slide 11: Xero model
Xero model Financial Raise enough money to win and build solid foundations Build the best team globally Make entry difficult for new players Operational excellence Network Build presence, channel, ecosystem and advocates Create a platform Drive network effects Innovation Disrupt existing product cate
Slide 12: Online accounting journey
Online accounting journey payment graph group buying business network smart Electronic Data notifications Interchange (EDI) invoicing portal Share bank feeds connected benchmarking d data multi-user leads and payments anywhere opportunities online mobile anytime 12
Slide 13: Single ledger disruptive and compelling
Single ledger disruptive and compelling For the For small accounting businesses practice Invoicing General ledger Management accounts Shared Debtors Annual accounts data Creditors GST Fixed assets Expense claims Tax Contacts Automated bank feeds 13
Slide 14: Pricing Plans
PRICING PLANS ALL XERO PRICING PLANS INCLUDE: q Fixed Assets q Unlimited customer support q Budgeting q Access anywhere online q Annual accounts production q Automatic back-ups q Unlimited users q Pay by direct debit or credit card q No set-up fees, upgrade fees or contracts q Cancel online at any t
Slide 15: Winning the accountant
Winning the accountant Providing the complete solution for partners Small Personal Small Medium Large Partner Edition • Cashbook • Ledger Reporting Practice Small Workpapers Tax Management Website Document e-Marketing Management Office/Email 15
Slide 16: The Add-on club
The Add-on club FlexiTime Payee € oplemine simPRO forve oA ezinerchant el O cee” fo @epayroll a FP Rewardsuper SPOTLIGHT —& wise nc (ED ewemntnone CIN7 WORKPAPERS ee one -™ BD snaresicn ©) chk 2 comert QsmartBiller en trigger-app & procision+ ative Docs = 0) onsertonmony : . 6 roller Quotient ProWor
Slide 17: 2. Market observations
2. Market observations 17
Slide 18: Market observations
Market observations Our prediction is playing out “Start-ups” “Nimble, funded, global” “Incumbents” Start-ups don’t have Expected Incumbents resources to be successful competitors have not (MYOB, Sage, Intuit) have in this market emerged finally entered market with less competitive Category now requ
Slide 19: MYOB Australasia
k i t c omes l I thi n ti on of MYOB Australasia B. “ W e l t ge On MYO what the nex t think a o ' n e r a down t rs want. I don e it to e iv custom product will g syncing them.” • MYOB sold to Archer Capital in January 2009 for ( I n t uit CEO) ith Brad Sm AU$382m • Archer sold to Bain in August 20
Slide 20: Sage
Sage “We suspect Sage’s new SaaS customers numbers will compare poorly with Xero” Numis Securities Ltd 5 Nov 2012 “Around half the new business in the accountancy Sage 3.7m software market is going to SaaS platforms” said Sage customers not on Nov 12 support “Sage has over 3.7m customer off support
Slide 21: Intuit
Intuit Brad Smith, Intuit CEO: Customer satisfaction levels had "I admire them. I think Rod Drury and begun to stagnate. And over time the team have built a really good the anchor products, especially company, they have built a very easy Quicken, had come to seem clunky and compelling product. We've
Slide 22: Xero proven execution
Xero proven execution • Agile committed culture led by an experienced management team • Sales channel scaling globally • 10 major product releases in past twelve Sydney, May 2012 months Awards: Overall winner of ICT Excellence • Winning recognition internationally award, the highest accolade at CeBI
Slide 23: Australian execution
Australian execution The Aussie market •2,000,000 small businesses •Addressable market of 1,200,000 •11,000 Accounting Practices •18,000 Bookkeepers •Dominated by MYOB and Reckon •A country renowned for early adoption Xero achievements in 18 months •From 4,500 to 35,000 Australian customers •From 18
Slide 24: 3. Half year results
3. Half year results 24
Slide 25: Performance highlights
Performance highlights 6 months to 6 Months to Increase 30 Sept 2012 30 Sept 2011 Total Revenue & other income $17.3m $7.9m +119% Operating expenses $22.8m $11.1m +105% EBITDA $(5.5)m $(3.2)m +72% Net loss after tax $(7.0)m $(3.7)m +89% At 30 Sept 2012 At 30 Sept 2011 Cash & cash equivalents $30.6m
Slide 26: Growth continues
Growth continues Customer numbers and revenue are growing strongly Customers Revenue ($000’s) March 2007 204 24 2008 950 134 2009 6,000 959 2010 17,000 3,158 2011 36,000 9,341 March 2012 78,000 19,370 Sept 2012 111,800 (half-year) 17,300 Annualised Monthly Committed Revenue $38,700,000 - 30 sept 201
Slide 27: Regional Growth
Regional Growth Revenue Customer numbers 6 months to 6 months to 6 months to 6 months to 30 Sept 2012 30 Sept 2011 30 Sept 2012 30 Sept 2011 New Zealand $7.7m $4.6m 57,300 30,600 Australia $5.6m $1.8m 32,500 10,400 United Kingdom $2.4m $1.1m 15,100 7,300 United States/Global $1.2m $0.4m 6,900 3,000
Slide 28: 4. Growth strategy and outlook
4. Growth strategy and outlook 28
Slide 29: Growth strategy
Growth strategy Vision The global leader of small business accounting Mission Grow prosperity by connecting people, money and resources with beautifully designed software Goal Achieving scale by winning one million+ customers Channel & Product Network Customer Business Model Disrupt category with Bu
Slide 30: Large global market opportunity
Large global market opportunity Current Xero Potential market Current market Target Xero Implied Claimed Country Competitor Main market customers (Sept 12) (SMB) size Customers market share customers MYOB NZ, AUS 1,000,000 New Zealand 57,300 322,000 17.8% 120,000 37.3% Sage UK 6,000,000 Australia 32
Slide 31: Stars are aligned - now is the time to go
“Stars are aligned - now is the time to go ” 31
Slide 32: Funding next wave of growth
Funding next wave of growth Existing Existing investors & SaaS markets specialists Opportunity provided in SaaS natives March 12 Markets Big for our US brand Major raise distraction Approached us on execution Supportive of the Likelihood of supporting valuation $6 valuation unknown Ease of transacti
Slide 33: Funding next wave of growth
Funding next wave of growth “Accounting software YAHOO.com company Xero zeros in on “Peter Thiel, the former PayPal QuickBooks with $67M” CEO who is also famous for Venture beat.com making billions investing in Day 1 Facebook during it's early days, just made another huge USA bet. “Peter Thiel's Val
Slide 34: Accelerated investment for growth
Accelerated investment for growth Opportunity Investment focus Product Continued product disruption • Deliver full horizontal product • Deliver channel practice management tools • AU Tax features and US Payroll • Driving network effects Channel & Network Further expansion of the sales teams • Drive
Slide 35: Outlook FY2013
Outlook FY2013 Accelerated investment in the business in this early stage of the market will create the best long-term value for shareholders. Xero has added 130 new jobs in the last 12 months reaching 278 staff as of 30 September 2012. The company has significant cash reserves and will expand the t
Slide 36: Questions
Questions 36