Xero Limited · ASX:XRO
Xero — Shareholder Meeting (August 2019)
37 slides from Xero's shareholder meeting presentation, Aug 15, 2019
Slide 1: Annual meeting 15 August 2019
Annual For personal use only meeting 15 August 2019 Auckland, New Zealand WELLINGTON | NEW ZEALAND !1
Slide 2: Important notice
Important notice For personal use only This presentation is given on 15 August 2019 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
Board of Graham Smith Rod Drury For personal use only CHAIR OF THE BOARD XERO FOUNDER Directors INDEPENDENT NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR Nominations Committee (Chair) Audit and Risk Management Committee Lee Hatton Dale Murray, CBE INDEPENDENT NON-EXECUTIVE DIRECTOR INDEPENDENT NON-E
Slide 4: Agenda
Agenda Chair's Financial CEO Q&A address overview update For personal use only Graham Smith Kirsty Godfrey-Billy Steve Vamos CHAIR OF THE BOARD CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER !4
Slide 5: Chair's address
Chair’s For personal use only address Graham Smith CHAIR OF THE BOARD LONDON | UNITED KINGDOM !5
Slide 6: Resolutions
Resolutions For personal use only XEROCON | SAN DIEGO, US !6
Slide 7: Resolution: Fixing the remuneration of the auditor
RESOLUTION 1 For Fixing the 91,335,072 For personal use only 96.96% remuneration of the auditor Against 2,774,653 That the Board is authorised to fix the 2.95% remuneration of the auditor for the ensuing year Discretionary 86,088* 0.09% * 43,772 of which are held by the Chair of the Meeting who inte
Slide 8: Resolution: Re-election of Susan Peterson as a director
RESOLUTION 2 For Re-election of Susan 93,391,971 For personal use only 99.15% Peterson as a director Against That Susan Peterson, retiring from office as a director of Xero at the meeting by rotation in 715,217 accordance with Xero’s Constitution, be re- 0.76% elected as a director of Xero Discretio
Slide 9: Resolution: Election of David Thodey as a director
RESOLUTION 3 For Election of David 94,096,987 For personal use only 99.90% Thodey as a director Against That David Thodey, appointed by the Board as a director on 27 June 2019, and who will retire at 7,814 the meeting in accordance with Xero’s 0.01% Constitution and the ASX Listing Rules, be elected
Slide 10: Resolution: Increase cap on non-executive director remuneration
RESOLUTION 4 For Increase cap on 65,315,557 For personal use only 99.61% non-executive director remuneration Against 171,636 That, for the purposes of ASX Listing Rule 10.17, 0.26% the maximum annual remuneration able to be paid to all of the non-executive directors of Xero taken together be increas
Slide 11: Target Xero director fees
RESOLUTION 4 Target Xero director fees New Zealand Dollars Target For personal use only Country Chairman Director Audit Chair Remuneration Chair Nominations Chair director FY19 FY20-21 FY19 FY20-21 FY19 FY20-21 FY19 FY20-21 FY19 FY20-21 fees NZ $180,000 $358,000 $90,000 $145,000 $20,000 $30,000 $15,
Slide 12: Director fees - by individual
RESOLUTION 4 Director fees - by individual New Zealand Dollars Director For personal use only Previous Fees Actual @ 27 Jun 2019 Proposed @ 1 Sept 2019 fees Name Director Fees Committee Chair Fees Total Fees Director Committee Fees Chair Fees Total Fees Director Committee Fees Chair Fees Total Fees
Slide 13: Resolution: Increase cap on non-executive director remuneration
RESOLUTION 4 For Increase cap on 65,315,557 For personal use only 99.61% non-executive director remuneration Against 171,636 That, for the purposes of ASX Listing Rule 10.17, 0.26% the maximum annual remuneration able to be paid to all of the non-executive directors of Xero taken together be increas
Slide 14: Resolution: Approval of the issue of shares to a director
RESOLUTION 5 For Approval of the issue 94,045,433 For personal use only 99.85% of shares to a director - Lee Hatton Against 54,438 That, for the purposes of ASX Listing Rule 10.11 0.06% and for all other purposes, approval is given for Xero to issue shares to Lee Hatton in lieu of her remuneration o
Slide 15: Financial overview
Financial For personal use only overview Kirsty Godfrey-Billy CHIEF FINANCIAL OFFICER CBD | SINGAPORE !15 15
Slide 16: Proof points of a strong business model
Proof points of a strong business model For personal use only 1 Annualised monthly Free cash flow Xero subscriber growth recurring revenue as % of revenue 10% 1.2% $ 154m 0% FY15 FY16 FY17 FY18 FY19 432,000 added in 12 months added in 12 months -10% -20% $ 638m 1,818,000 Annualised monthly -30% subs
Slide 17: Global growth and major cash flow milestone
AMRR FREE CASH FLOW Global $638.2m $6.5m For personal use only growth and + 32% YOY (32% in constant currency1) + $35.0m YOY major cash flow SUBSCRIBERS ARPU milestone 1.8m $29.25 + 432,000 YOY + 0.4% YOY (0.8% in constant currency1) OPERATING REVENUE EBITDA EXCLUDING IMPAIRMENTS $552.8m $91.8m 1 Se
Slide 18: Positive LTV trends plus strong subscriber growth
Total subscriber lifetime Positive LTV value (LTV) For personal use only trends plus strong subscriber growth > 1.1b$ added in 12 months March 2019 Progress from March 2018 $ 4.4b ARPU $29.25 Churn % 1.10% $ 3.2b Gross margin 84% LTV per subscriber $2,398 +4%1 1Constant currency based on FX rates 31
Slide 19: Positive EBITDA momentum
EBITDA margin Positive EBITDA For personal use only momentum 30% Continued scale and efficiency progress 20% contributed to FY19 performance: EBITDA margin improved modestly due to $18.6m 10% of impairment costs, relating to costs associated with our change in US payroll strategy, and acquisition re
Slide 20: First positive free cash flow result
First positive free Movement in net cash position For personal use only cash flow result FY18 ($000s) FY19 ($000s) YOY change ($000s) Significant milestone passed with first positive free cash flow result in FY19 of $6.5m, equivalent Cash and 20,955 121,527 100,572 cash equivalents to 1.2% of FY19 o
Slide 21: Beauty of Xero's SaaS model
Beauty of Generate long- For personal use only term value Xero's SaaS model Acquire subscribers Grow revenue economically per subscriber at scale Grow gross Retention at margins scale 21
Slide 22: Unit economics: Value of a Xero subscriber
Unit Value of a Xero subscriber For personal use only economics $2,000 $1,500 LTV/CAC 6.0 Compelling SaaS unit economics and track $1,000 $500 LTV $2,398 CAC months 13.6 MRR churn 1.10% record of LTV/CAC 6.0 CAC $0 $397 LTV $2,398 $-500 value Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 c
Slide 23: New accounting standards
IFRS 15 New Revenue from contracts with customers For personal use only • Xero’s commission costs will be capitalised and expensed over time accounting • This standard also changes the classification and timing of when revenue is recognised standards IFRS 16 Leases Xero adopted three new • The major
Slide 24: CEO update
CEO For personal use only update Steve Vamos CHIEF EXECUTIVE OFFICER XERO UNDER | MELBOURNE, AU !24 24
Slide 25: Our purpose and our mission
OUR PURPOSE IS OUR MISSION IS For personal use only “ “ Make life better for Rewire the world of people in small small business, business, their advisors making it seamless, and communities simpler and smarter around the world 25
Slide 26: Social and environmental impact
Social and For personal use only environmental impact 26
Slide 27: Strategic priorities
Drive cloud Grow small Building Strategic accounting business for global For personal use only platform scale and priorities innovation !27 27
Slide 28: Drive cloud accounting scale
Cloud accounting adoption1 FY19 subscriber additions by geography Drive cloud For personal use only AU accounting ANZ 193,000 >50 % NZ Australia and New Zealand UK North International America 239,000 RoW 1Estimated adoption rates across English speaking addressable cloud accounting <20 % 0k 40k 80k
Slide 29: Grow small business platform
App Partners / Ecosystem Xero solutions Xero products 700+ connected apps Gusto (US Payroll) Bank feeds Projects >50,000 users of Xero’s API Payroll Hubdoc developer tools Expenses WorkflowMax Grow small For personal use only For small business business Small businesses can manage their day-to-day p
Slide 30: Revenue composition and growth
Grow small Revenue composition Revenue growth YOY For personal use only business 128% platform Group operating revenue $552.8m 91% 42% 36% 34% Group operating revenue 5% 16% growth 1% 3% Core accounting WorkflowMax2 Core Platform Non- WorkflowMax2 Platform revenues1 Non-recurring3 accounting revenue
Slide 31: Building for global scale and innovation
Leading data capture Building service For personal use only Drives productivity for for global both partners and small business scale and innovation Innovative capital raise US$300m convertible notes offer demonstrates investor confidence in the business Provides flexibility to execute acquisitions
Slide 32: Xero Leadership Team
Steve Vamos Anna Curzon Kirsty Xero CHIEF EXECUTIVE OFFICER CHIEF PRODUCT OFFICER Godfrey-Billy For personal use only CHIEF FINANCIAL OFFICER Leadership Team Craig Hudson Trent Innes MANAGING DIRECTOR, NEW MANAGING DIRECTOR, ZEALAND AND PACIFIC ISLANDS AUSTRALIA AND ASIA Rachael Powell Mark Rees CHI
Slide 33: Outlook
Outlook For personal use only 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 Free cash flow1 in the financial year to 31 Mar
Slide 34: Q&A
Q&A For personal use only HUNT & GATHER BEE CO. | WAIKATO, NZ !34 34
Slide 35: Appendix
Appendix For personal use only LUNE | MELBOURNE, AU !35 35
Slide 36: Glossary
Glossary For personal use only Subscribers Lifetime value (LTV) Subscriber means each unique subscription to a Xero-offered product that is purchased LTV is the gross margin expected from a subscriber over the lifetime of that subscriber. by an accounting partner or an end user and which is, or is a
Slide 37: xero.com/investors
For personal use only xero.com/investors