Slide 1: Investor briefing: Full year results to 31 March 2018
Investor For personal use only briefing Full year results to 31 March 2018 X 10 May 2018 Junk & Disorderly, Auckland
Slide 2: Important notice
Important notice For personal use only This presentation is on behalf of Xero Limited (ASX:XRO) • may contain information from third parties believed (Company number NZ 183 0488, AU ARBN 160 661 183) to be reliable; however, no representations or warranties are made as to the accuracy or completenes
Slide 3: Agenda
Agenda Business Operating Financial Outlook Q&A For personal use only overview performance results Steve Vamos Sankar Narayan Kirsty Godfrey-Billy Chief Executive Officer Chief Operating and Chief Accounting Officer Financial Officer 3
Slide 4: Business overview
Business For personal use only overview Steve Vamos Chief Executive Officer Popcorn Shed, London4
Slide 5: Xero platform – scalable growth through partners
Xero platform – scalable growth through partners For personal use only Deeper penetration in existing markets and Online invoicing geographic expansion Reporting Connected and quotes For small app Information security business ecosystem Payments Dashboards Small businesses can manage their day-to-da
Slide 6: Focus going forward
Focus going forward For personal use only Continued Global and alignment regional with operating strategy model Great Capital product investment management framework 6
Slide 7: Xero's mission and priorities
Win with Great accountants people and For personal use only and teams bookkeepers Xero’s mission is to rewire the global Beautiful products economy, connecting Grow into and global millions of new spaces and places platform businesses to their banks, advisors and Love and each other Build to protect
Slide 8: Operating performance
Operating For personal use only performance Sankar Narayan Chief Operating and Financial Officer X Biz Synergy, Maitland
Slide 9: Positive EBITDA with continued growth
Positive EBITDA with continued growth For personal use only POSITIVE EBITDA AMRR 1 SUBSCRIBERS OPERATING REVENUE OPERATING CASH FLOW $ 484.4m 1.4m $ 26.0m 406.6 m $ $ 41.2m + 33% YOY + 351,000 YOY + 38% YOY +46m YOY + $55m YOY 1 See page 32 for details on annualised monthly recurring revenue 9
Slide 10: Consolidated listing on the ASX – inclusion in S&P/ASX
Consolidated listing on the ASX – inclusion in S&P/ASX 100 For personal use only Broader analyst Access to a and broker larger market coverage Increased relevance to a Increased more diverse liquidity range of larger investors 10
Slide 11: Listed ASX & NZX tech companies by revenue growth and market capitalisation
Listed ASX & NZX tech companies by revenue growth and market capitalisation For personal use only WEB GBT CL1 MLB TME PPH ALU BRN TNE ESV CGL 3PL RHP IRI BIG DWS OHE RXP APX MUA MYO HSN DTL RUL CAT LVH ISU RBL AD8 BVS NXT MP1 LVT ISD REA SKO ERD KGN ELO Market capitalisation IRE in $AUD at 18 Apr 20
Slide 12: Subscribers: 351,000 added in 12 months
351,000 added in 12 months For personal use only 1,386,000 Subscribers Mar 18 Mar 07 12
Slide 13: Annualised monthly recurring revenue
$ 121m For personal use only added in 12 months $ 484m Annualised monthly recurring revenue Mar 11 Mar 18 13
Slide 14: Cash outflow as % of revenue
Cash outflow as % of revenue 1 For personal use only 0% FY15 FY16 FY17 FY18 -20% -40% -60% (71%) to (9%) in 3 years -80% 1 Operating and investing cash flows 14
Slide 15: Increasing total group subscriber lifetime value
Increasing Total group subscriber lifetime value (LTV) lifetime value For personal use only March 2018 Progress from $ 990m March 2017 ( 1.0b in CC ) $ 2 added in 12 months ARPU $29.13 MRR churn % 1.10% $ 3.2b Gross margin 81% LTV per subscriber1 $2,310 +9%2 $ 2.2b 1 Increased 8% YOY in nominal term
Slide 16: Contribution margins improving
Contribution Australia and New Zealand contribution margins For personal use only $ 156m improving $160m $120m Australia and New Zealand improvements highlight continuing efficiencies and $80m operating leverage International investment loss reduced even $40m with investments in new geographies such
Slide 17: Australia and New Zealand
Australia and Subscribers 884k New Zealand For personal use only 900k Australia • 31% subscriber growth to 583,000 subscribers (adding 450k 137,000 in the period). Revenue growth of 35% YOY • Extending partnership with NAB on payments and data 0k • Xero Small Business Insights highlights real-time t
Slide 18: United Kingdom
United Kingdom Subscribers 312k For personal use only 47% subscriber growth to 312,000 subscribers 320k (adding 100,000 in the period). Revenue growth of 60% YOY Leadership position further enhanced with cloud 160k based accounting revenue growth. Overtaken New Zealand to be the second largest regio
Slide 19: North America
North America Subscribers 132k For personal use only 43% subscriber growth to 132,000 subscribers 140k (adding 40,000 in the period). Revenue growth of 28% YOY Continued focus on strengthening the accounting 70k partner channel, making inroads into mid and large size accounting firms 0k Under-penetr
Slide 20: Rest of World
Rest of World Subscribers 58k For personal use only 49% subscriber growth to 58,000 subscribers 60k (adding 19,000 in the period). Revenue growth of 47% YOY 40k South East Asia 20k • Enhancing financial partnerships and integrations. Improving brand position in the cloud accounting market 0k Mar 16
Slide 21: Growing the small business platform
Growing the small business platform For personal use only 94% Revenue Revenue composition growth YOY Group operating revenue 50% $406.6m 37% 38% 29% Group operating Core accounting revenue growth Platform revenues1 93% WorkflowMax2 Non-recurring3 Core Platform WorkflowMax2 Non- 3% accounting revenue
Slide 22: Financial results
Financial For personal use only results Kirsty Godfrey-Billy Chief Accounting Officer X Little Veggie Patch, Melbourne
Slide 23: Financial performance
Financial FY17 ($000s) FY18 ($000s) YOY change YOY change performance ($000s) (%) For personal use only Total operating 295,389 406,579 111,190 38% revenue Operating revenue growth of 38% YOY driven by Australia and New Zealand segment growth of Gross profit 226,004 330,333 104,329 46% 33% and Inter
Slide 24: Improving gross margin
Improving Gross profit as percentage of revenue gross margin For personal use only 85% Gross margin of 81% for FY18, +4pp over prior year Realised benefits of AWS platform since successful migration in H2 FY17 81% Opportunities to further increase gross margin with further efficiencies in AWS platfo
Slide 25: Positive EBITDA margin
Positive EBITDA margin EBITDA For personal use only 15% First positive EBITDA for the full-year driven by operating efficiencies across the business 6% EBITDA excl. SBP1 was $43.0m in FY18, an improvement of $59.9m YOY from $(16.9m) 0% loss in FY17 -15% -30% FY16 FY17 FY18 EBITDA EBITDA excl. SBP1 1
Slide 26: Improved product and acquisition efficiencies
Improved product Product costs including opex and capex as % of revenue 1 and acquisition For personal use only 50% efficiencies 40% 34% Next phase of investment in realising benefits from a single global platform 30% FY16 FY17 FY18 Investments focused on driving future ARPU and revenue growth: • St
Slide 27: Positive operating cash flow
Positive Improvement in operating cash flow operating For personal use only $50m $ 41m cash flow $25m Positive operating cash flow of $41.2m for FY18, an improvement of $45.6m from $(4.4m) in FY17 Operating and investing cash flows as a % of revenue improved to 9% in FY18. Total operating $0m and in
Slide 28: Outlook
Outlook For personal use only X Cafebond, Singapore
Slide 29: Xero will continue to focus on growing its global small business platform
For personal use only Xero will continue to focus on growing its global small business platform Cash outflow1 in FY19 is forecast to reduce from FY18. Xero is managing the business to cash flow break-even within its current cash balance (without drawing on its debt facility) through operational effi
Slide 30: Q&A
Q&A For personal use only X Starward Distillery, Melbourne
Slide 31: Appendix
Appendix For personal use only X Cookhouse, San Francisco
Slide 32: Glossary
Glossary For personal use only Subscribers Total lifetime value Subscriber means each unique subscription to a Xero-offered LTV is the gross margin expected from a subscriber over the lifetime of that product that is purchased by an accounting partner or an end subscriber. This is calculated by taki
Slide 33: www.xero.com/investors
For personal use only www.xero.com/investors