Slide 1: Investor briefing
Investor briefing For personal use only 23 May 2014 Beautiful accounting software
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 rec
Slide 3: What we're going to cover
What we’re going to cover For personal use only Financial Business US update Q&A performance model 3
Slide 4: FY2014 highlights
FY2014 highlights For personal use only Operating revenue Customers Staff $70.1m 284,000 758 ACMR at $93m 45% in “Class of 2014” Staff numbers doubled in 12 months Accounting partners Cash to invest 11,573 $210m 45% of partners Raised $180m added in FY2014 in Oct 2013 4
Slide 5: Financial performance
Financial performance For personal use only Year ended 31 March 2014 ($000s) 2013 ($000s) % change Operating revenue 70,091 38,353 83% Other income 1,383 936 48% Total revenue and other income 71,474 39,289 82% Cost of revenues 24,516 13,916 76% Gross profit 46,958 25,373 85% Total operating expense
Slide 6: Country growth
Country growth For personal use only Customers Operating Revenue (NZ$000s) Partners 2014 2013 Growth 2014 2013 Growth 2014 2013 Growth NZ 102,000 73,000 40% 24,104 16,420 47% 2,646 2,150 23% AU 109,000 51,000 114% 29,297 13,734 113% 5,328 2,694 98% UK 47,000 22,000 114% 10,429 5,477 90% 1,797 919 96
Slide 7: Market share
Market share For personal use only Small business Partners Current Small Current Current Accounting & Current customers businesses* market share partners Bookkeeping firms* market share NZ 102,000 0.45m 23% 2,646 3.5k 76% AU 109,000 2.0m 5% 5,328 29k 18% UK 47,000 4.3m <1% 1,797 34k 5% Nth America 1
Slide 8: Expenditure
Expenditure For personal use only Year ended 31 March 2014 2013 % Change Cost of revenues 24,516 13,916 76% % operating revenue 35% 36% (1%) Sales and marketing 55,105 22,043 150% % operating revenue 79% 57% 22% Product design & dev 34,089 18,898 80% % operating revenue 49% 49% 0% General and admin
Slide 9: Our business
Our business For personal use only Revenue Less Cost of Sales & Product G&A Equals NPBT revenues marketing Maintain and Customers Hosting & Ops Education Facilities* improve x + + + + ARPU Innovate and Bank feeds Partner channel Recruitment* (product mix) broaden - + + + Customer Churn Online channe
Slide 10: Revenue
Revenue For personal use only “Well, if you believe, as we do, that • Customer acquisition: Build initial technology markets tend to be winner-take-all, the leaders in any relationship with Xero and the partner given category will get an unfair share of the overall economic pie. ecosystem True, not
Slide 11: Churn trends down
Churn trends down For personal use only Group FY14 Partner channel matures NZ FY14 Product fit improves Ecosystem develops 1.4% Position as market leader <1% revenue churn revenue churn per month per month Improving retention (Future improvements) Customer activity insights SaaS release cadence Clou
Slide 12: Cost of revenues
Cost of revenues For personal use only (SaaS term: Cost To Serve or CTS) Drivers based on product volume: Cost of revenues • Hosting – PaaS/IaaS trends provide future opportunities for substantially improved economics • Bank feeds – range from nil to $3.00 per customer/month, the view is costs will
Slide 13: Sales and marketing
Sales and marketing For personal use only (SaaS term: Cost to Acquire Customers or CAC) • High growth in a SaaS business requires substantial upfront CAC investment that delivers revenues in future periods • Current accounting practices do not allow CAC costs and revenues to be aligned i.e. if avera
Slide 14: CAC metrics
CAC metrics For personal use only Market phase 2014 2014 2014 2015 Recruit, Educate, Grow Months of ARPU to LTV LTV:CAC Projected trend recover CAC NZ Educate, grow 5.7 $1300 9.5x steady steady/improvement AU Recruit, educate 9.5 $1300 4.3x 9.8 steady/improvement UK Recruit, educate $1100 4.5x “Mont
Slide 15: Sales & marketing
Sales & marketing For personal use only Partner channel Online channel Ecosystem 15
Slide 16: Partner channel
Partner channel For personal use only Unique to accounting software • Accountants and bookkeepers are a proven channel to small businesses • Education led sales approach via XeroU, XeroTV and online events • The partner channel is a leveraged model (e.g. one sales person: 300 Partners: 100 customers
Slide 17: Online channel
Online channel For personal use only • Increasing investment in online • Substantially lower CAC than partner channel • Improved sign up experience will lift conversion of unique visitors to new customers • Focus on vertical solutions using add-on partners • Non-traditional marketing investments: -
Slide 18: Ecosystem channel
Ecosystem channel For personal use only • Network of companies stronger than a single brand • We believe an open approach wins • Seek large partners upstream • Be the easiest partner for innovators • Leverage energy and investment of many partners. 18
Slide 19: Product design and development
Product design and development For personal use only • Leverage clean architecture to deliver on a faster cadence and broader product set than incumbents • FY14 substantially increased capacity of team to 236 (119 added in FY2014) • Xero built by Xero's - we believe in the craft of software developm
Slide 20: General and administration
General and administration For personal use only • Investing in scalable cloud based systems G&A • G&A will reduce as a percentage of operating revenue with scale 18% <10% 2014 Aspirational 20
Slide 21: Focus on the USA
For personal use only the USA 21 Focus on
Slide 22: Adoption curve
Adoption curve For personal use only Early majority Late majority 34% 34% Early adopters NZ 13% Laggards Innovators AU 16% 3% UK US Win Recruitment Go deep and win share Drive ARPU and influencers and go broad B2B and B2G initiatives network effects 22
Slide 23: US market entry phase
US market entry phase For personal use only Partnerships & Product People Integrations GTM Foundations in place US Directors Square Influencers Payroll first-release Nth American CEO H&R Block PR Product reviews VP Education Expensify Education match QBO Denver Support SquareSpace Accounting channel
Slide 24: US plans 2015
US plans 2015 For personal use only Partnerships & Product People Integrations GTM Deliver best in class Complete Best ecosystem Online Channel US product US leadership team for scale Execute on existing Focus on key Innovate faster relationships segments Global Management Change product focussed on
Slide 25: Q&A
For personal use only Q&A
Slide 26: Beautiful accounting software
For personal use only Beautiful accounting software