Xero Limited · ASX:XRO
Xero — Shareholder Meeting (July 2017)
42 slides from Xero's shareholder meeting presentation, Jul 12, 2017
Slide 1: Annual meeting 12 July 2017
Annual For personal use only meeting 12 JULY 2017 THE FLORAL ATELIER, SINGAPORE
Slide 2: Important notice
Important notice For personal use only This presentation is given on behalf of Xero Limited (NZX/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 subscription, purchase, or re
Slide 3: Chair's address
For personal use only Graham Smith Chair’s address 3
Slide 4: Board of Directors
Board of Directors For personal use only Rod Drury Lee Hatton Susan Peterson Xero founder and one of Australasia's leading More than 20 years of financial services More than 15 years of financial services technology entrepreneurs. Awarded AMS experience and is currently CEO of UBank, experience. Cur
Slide 5: Director farewell
For personal use only Craig Elliott Director farewell 5
Slide 6: Resolutions
Resolutions For personal use only LIVINGSEAS, TIOMAN, SINGAPORE 6
Slide 7: Fixing the Remuneration of the Auditor
Fixing the Remuneration For personal use only of the Auditor PROXIES For 76,400,552 (99.62%) RESOLUTION 1 That the Board is authorised to fix the remuneration of Against the auditor. 121,127 (0.16%) Discretionary 170,556 (0.22%) 7
Slide 8: Election of Susan Peterson as a Director
Election of Susan For personal use only Peterson as a Director PROXIES For 75,203,816 (98.07%) RESOLUTION 2 That Susan Peterson, appointed by the Board as a Against Director on 22 February 2017, be elected as a Director of 1,304,161 (1.70%) Xero Limited. Discretionary 177,815 (0.23%) 8
Slide 9: Re-election of Lee Hatton as a Director
Re-election of Lee For personal use only Hatton as a Director PROXIES For 76,433,060 (99.67%) RESOLUTION 3 That Lee Hatton, retiring from office as a Director of Xero Against Limited by rotation, be re-elected as a Director of Xero 79,573 (0.10%) Limited. Discretionary 176,185 (0.23%) 9
Slide 10: Non-Executive Director Remuneration
Non-Executive Director For personal use only Remuneration PROXIES For 57,904,081 (93.12%) RESOLUTION 4 (a) That the maximum annual remuneration able to be Against paid to all of the Non-Executive Directors taken together 4,144,489 (6.66%) be increased from NZ$850,000 to NZ$1,400,000 (i.e., a NZ$550,
Slide 11: Business overview, Partner Strategy, CEO update, Q&A
For personal use only Business Partner Strategy Q&A overview focus update Sankar Narayan Anna Curzon Rod Drury CHIEF OPERATING AND CHIEF PARTNER OFFICER CHIEF EXECUTIVE OFFICER, FOUNDER FINANCIAL OFFICER 11
Slide 12: Business overview
Business For personal use only overview Sankar Narayan CHIEF OPERATING AND FINANCIAL OFFICER HOT POD YOGA , UNITED KINGDOM 12
Slide 13: Annualised committed monthly revenue $360m
For personal use only $ 360m Annualised committed monthly revenue Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 13
Slide 14: Subscriber growth with revenue growth
Subscriber growth Indexed 12 month ACMR growth 1 with revenue growth For personal use only Quality subscribers essential to ensure 340 long-term margins and lifetime value 280 Long-term subscribers that recognise value in the service Index 220 Growing revenues faster than subscribers delivers strong
Slide 15: Xero is a global small business platform
Xero is a global small business platform For personal use only Subscribers at 31 March 2017 246,000 446,000 212,000 92,000 39,000 New Zealand Australia United Kingdom North America Rest of world Xero versus nearest global competitor cloud subscribers1 (excluding North America) Leading cloud accounti
Slide 16: Balanced investment
Balanced investment For personal use only Growth with operating efficiencies ANNUALISED COMMITTED OPERATING EBITDA MARGIN NET LOSS TOTAL GROUP SUBSCRIBER MONTHLY REVENUE REVENUE EXCL. SBP 3 AFTER TAX LIFETIME VALUE $ 360m +51 % YoY 2 (6 ) % ( 69m) $ + $ 688m +45% YoY 1 $295m +16pp YoY Reduced 16% YoY
Slide 17: $688m of value added in subscriber base
$688m of value added Total group subscriber lifetime value (LTV) in subscriber base For personal use only $2.2b Improved key underlying drivers of lifetime value $2.2b $0.7b added 1 March Progress from 2017 March 2016 Subscribers net adds 318,000 $1.5b ARPU $29 $1.1b CMR churn % 1.15% Gross margin 7
Slide 18: Improved EBITDA
Improved EBITDA EBITDA margins For personal use only EBITDA excl. SBP1 was positive in H2 FY17 at $1.6m compared to a $(17.4m) loss in H2 FY16 Significant improvement in EBITDA 20% performance driven by: EBITDA excl. SBP 1 • Higher gross margin 0% • Improved CAC efficiencies EBITDA -20% • Product spec
Slide 19: Reducing cash usage
Reducing cash usage Operating cash flows and investing cash flows For personal use only $20m Operating cash outflow in FY17 reduced to $4.4 million from $34.8 million in FY16 $0m Operating cash flow positive for the first time in H2 -$20m FY17. Cash outflow of $11.4 million for H2 FY16 -$40m Operati
Slide 20: Xero – a strong margin model
Xero – a strong margin model For personal use only High gross margin Low cost of retention Common global cloud platform Deep business linkages AWS platform provides low Strong network effects Strong long-term margins marginal cost for future services Stickiness of small No legacy product support bus
Slide 21: Outlook
Outlook For personal use only OPERATING EFFICIENCIES CASH USAGE Operating metrics are expected to Cash usage in FY18 (based on FX rates at 1 improve in FY18 as the Company drives April 2017) is forecast to reduce from FY17. efficiencies through automation and Xero is managing the business to cash fl
Slide 22: Disciplined execution in a large unaddressed market
Disciplined execution in a large unaddressed market For personal use only Disciplined focus on quality growth Extending the global Investing in innovation Driving operating Extending into new platform and footprint and long-term growth excellence product and services 22
Slide 23: Partner focus
Partner For personal use only focus Anna Curzon CHIEF PARTNER OFFICER RIGHTWAY, NEW ZEALAND 23
Slide 24: A global platform connecting small businesses and advisors
Xero is a unique global platform that connects For personal use only small businesses and their advisors Xero Xero HQ Single ledger, data & docs Connected apps HQ apps 24
Slide 25: Driven by our world-class partner experience
Driven by our world-class partner experience For personal use only A vibrant, open community supported by educational resources and tools Tax solutions Xero advisor directory Practice management Xero compliance and reporting XERO HQ PLATFORM Open platform on a single code-base XERO PLATFORM Leveragi
Slide 26: The leading cloud tax software in Australia
The leading cloud tax For personal use only software in Australia Thousands of Australian accounting practices are using Xero Tax for their customers1 Only comprehensive online tax solution in Australia that has lodged more than one million returns2 Investing in the platform to reduce the compliance
Slide 27: Small businesses connected with an advisor are more successful
When small businesses connect with an advisor, they’re both more successful For personal use only 90% of Xero subscribers are connected to an advisor1 SMALL BUSINESSES ACCOUNTING PARTNERS Connected to an advisor Providing cloud accounting grow net profit 23% faster grow revenue 80% faster Using clou
Slide 28: Positioned for accounting partners moving to the cloud
Ideally positioned for more accounting partners to move to the cloud and the golden age for accounting For personal use only Proven formula Global platform unlocking Partnering to build for growth power of machine learning the future and artificial intelligence 28
Slide 29: CEO update
CEO For personal use only update Rod Drury BAWA CAFE, AUSTRALIA 29
Slide 30: Executive leadership team
Sankar Narayan Trent Innes CHIEF OPERATING AND AU MANAGING DIRECTOR For personal use only FINANCIAL OFFICER Anna Curzon Craig Hudson CHIEF PARTNER OFFICER NZ COUNTRY MANAGER Tony Stewart Gary Turner CHIEF PRODUCT, PLATFORM UK AND EMEA AND DATA OFFICER MANAGING DIRECTOR Rod Drury CHIEF EXECUTIVE OFFI
Slide 31: Subscriber milestones 2007–2017
318,000 For personal use only added in one year 1,035,000 subscribers 500,000 added in two years 50,000+ subscribers 2007 2012 2015 2016 2017 31
Slide 32: Listed ASX & NZX tech companies revenue and growth
Listed ASX & NZX tech companies For personal use only revenue and revenue growth HSN HTB BVS CMB TMP ERD SEK BPS CAT OHE RHP ISD NZX APX IRE TCH PME ADA PPH CAR RBL NZX OCL ALU MIG SLI MUA PPS NZX MYO 1 SMX FLN IRI Xero WTC 3PL GTK GBT CGO NZX TME KGN RKN RUL NZX CL1 IFM VGL MLB GEG NZX ACX MOQ MBE
Slide 33: The network effect of a cloud business platform
The network effect of a cloud business platform For personal use only 2.5 million + 40 million + employees paid connections3 by subscribers1 on the platform 1 million + 20 million + subscribers connections2 have done business on platform J Joe’s Pizza House Edit Jo 150 Hunter Street J Foxglove Sydney
Slide 34: Global scale of the platform and data
Global scale of the platform and data For personal use only 220 million + $ 1.4 trillion + 3.5 million bank feed transactions transactions recorded in the hours of AWS usage in March 2017 year to 31 March 20171 in March 2017 3 petabytes of data on AWS 20 million + 4,800 $ 320 billion + connections2
Slide 35: Expanding the power of the Xero platform
Expanding the power of the Xero platform For personal use only Single code base, global cloud System of record with a Integrated applications platform connecting the small comprehensive view of the operating delivering wide range of business economy performance of the business business solutions A u
Slide 36: Growth opportunities
Growth opportunities For personal use only CURRENT POSITION OPPORTUNITIES Back office application Front office applications Core accounting Per employee services Small businesses Larger businesses Subscription revenues Finweb and other platform revenues English speaking Multi-language 36
Slide 37: Global platforms will win
Global platforms will win For personal use only Small businesses increasingly connected to global marketplaces Global platforms are motivated to connect for scale Compelling economics of a single global platform delivers R&D investment efficiencies across multiple geographies Platforms are consuming a
Slide 38: Xero is a unique company
For personal use only XERO IS A UNIQUE COMPANY Rare example of a true global platform Track record of anticipating market opportunity, market transformation and innovation Redefining business software in the machine learning age Global execution skills Significant growth potential with lowered risk
Slide 39: Q&A
Q&A For personal use only NEXBA , AUSTRALIA 39
Slide 40: Appendix
Appendix For personal use only FARMFEED, NEW ZEALAND 40
Slide 41: Glossary
Glossary For personal use only Subscribers Subscriber means each unique subscription to a Xero offered product that is purchased by an accounting partner or an end user and which is, or is available to be, deployed ACMR Annualised committed monthly revenue represents monthly recurring revenue at 31 M
Slide 42: Beautiful accounting software
For personal use only Beautiful accounting software www.xero.com