Xero Limited · ASX:XRO
Xero — H1 2013 Earnings Presentation
34 slides from Xero's earnings presentation, Nov 15, 2012
Slide 1: Investor Presentation - Xero Limited
For personal use only Investor Presentation - Xero Limited Rod Drury - CEO Ross Jenkins - CFO 15 November 2012
Slide 2: Disclaimer
Disclaimer For personal use only This investor presentation dated 15 November 2012 provides additional comment on the market release of 14 November 2012 and the Interim Half-Year Report. As such, it should be read in conjunction with, and subject to, the explanations and views in those documents. Th
Slide 3: Loved by over 200,000 people worldwide
Beautiful accounting software Try Xero for free Meet Arthur Wei, Treehouse Architect Loved by over 200,000 people worldwide 2 oe FE Ee eA "a » E r
Slide 4: Contents
Contents For personal use only 1. Business overview 2. Market observations 3. Growth strategy 4. Half year results and outlook 5. Questions 4
Slide 5: 1. Business overview
For personal use only 1. Business overview 5
Slide 6: Accounting is killer app for small business
Accounting is killer app for small business For personal use only 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
Slide 7: Positioning
Positioning For personal use only 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 7
Slide 8: Cloud Investment landscape (USD)
Cloud Investment landscape (USD) For personal use only Salesforce $19b Intuit $17b Workday Inc $7.5b e iv at Pr lic b Pu Netsuite $4.2b Success Factors $3.4b (SAP) Square $3.2b Yammer $1.2b (MSFT) Yelp $1.1b Box $1B $0.5 8
Slide 9: Public company
Public company For personal use only • Successful shareholder purchase plan in March 2012 - $15.6m raised - 50% of shareholders participated - Average investment > $10,500 • Approx 3000 shareholders, 78% of investors hold less than 10,000 shares each • 60% of shares held by Directors & staff • 107m
Slide 10: Capital
Capital For personal use only 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 201
Slide 11: Board structure
Board structure For personal use only 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 a
Slide 12: Xero model
Xero model For personal use only 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
Slide 13: Online accounting journey
Online accounting journey For personal use only 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 13
Slide 14: Single ledger disruptive and compelling
Single ledger disruptive and compelling For personal use only 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 14
Slide 15: Pricing plans
PRICING PLANS For personal use only 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
Slide 16: Winning the accountant
Winning the accountant For personal use only Providing the complete solution for partners Small Personal SmallMedium Medium Large Partner Edition • Cashbook • Ledger Reporting Practice Small Workpapers Tax Management Website Document e-Marketing Management Office/Email 16
Slide 17: The Add-on club
For personal use only The Add-on club 17
Slide 18: 2. Market observations
For personal use only 2. Market observations 18
Slide 19: Our prediction is playing out
Market observations For personal use only 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 competi
Slide 20: MYOB Australasia
s t h i n k it come n of “Well I eratio MYOB Australasia On M Y O t B o . w h e x at the n on't think a t g en down rs want. I d ive it to For personal use only u s t om e w i l l g c t produc syncing them.” • MYOB sold to Archer Capital in January 2009 for ( I n t u it CEO) it h Brad Sm AU$382m • A
Slide 21: Sage
Sage For personal use only “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
Slide 22: Intuit
Intuit For personal use only 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 com
Slide 23: Xero proven execution
Xero proven execution For personal use only • 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 hi
Slide 24: 3. Half year results
For personal use only 3. Half year results 24
Slide 25: Performance highlights
Performance highlights For personal use only 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 & ca
Slide 26: Growth continues
Growth continues For personal use only 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
Slide 27: Regional Growth
Regional Growth For personal use only 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
Slide 28: 4. Growth strategy and outlook
For personal use only 4. Growth strategy and outlook 28
Slide 29: Growth strategy
Growth strategy For personal use only 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 Di
Slide 30: Large global market opportunity
Large global market opportunity For personal use only 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
Slide 31: Stars are aligned - now is the time to go
For personal use only “Stars are aligned - now is the time to go ” 31
Slide 32: Accelerated investment for growth
Accelerated investment for growth For personal use only 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 th
Slide 33: Outlook FY2013
Outlook FY2013 For personal use only 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
Slide 34: Questions
For personal use only Questions 34