Xero Limited · ASX:XRO
Xero — Investor Presentation (May 2013)
42 slides from Xero's investor presentation, May 28, 2013
Slide 1: Investor Briefing
Investor Briefing For personal use only Xero Limited Beautiful accounting software 28 May 2013
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). Information in this presentation: • is for general information purposes only, and is not an offer or invitation for subscription or purchase of, or recommendati
Slide 3: Contents
Contents For personal use only 1. Business overview 2. Full year results 3. Market observations 4. Growth strategy 5. Questions 3
Slide 4: 1. Business overview
For personal use only 1. Business overview 4
Slide 5: Small business. Massive opportunity.
Small business. Massive opportunity. For personal use only Cloud aggregates and disrupts a large fragmented market • Multi-billion dollar market. • Accounting is foundation application. • Cloud changes the economics. • Desktop incumbents are not internet companies. Xero • Beautiful cloud accounting
Slide 6: Xero: Leading small business cloud platform
Xero For personal use only Leading small business cloud platform Vision Mission Goal Millions of people all over the Grow prosperity by connecting Achieving scale and value by world love doing business on Xero people through beautifully winning one million+ customers designed business software Pract
Slide 7: 2. Full year results
For personal use only 2. Full year results 7
Slide 8: 2013 Highlights
2013 Highlights For personal use only Revenue growth Customers Staff 102% 157,000 382 Accounting partners Service availability Cash to invest Share price increase 6000 99.97% $78m 274% 99.998% (CY 2013) 8
Slide 9: Growth continues
Growth continues For personal use only March year end 2007 2008 2009 2010 2011 2012 2013 Customers 204 950 6,000 17,000 36,000 78,000 157,000 Revenue ($000’s) 24 134 959 3,158 9,341 19,370 39,033 Regional growth to year ended 31 March 2013 2011 2012 2013 +56% +219% +100% +100% New Zealand Australia
Slide 10: Continuing 100% revenue growth
Continuing 100% revenue growth For personal use only 40,000,000 30,000,000 20,000,000 10,000,000 0 2008 2009 2010 2011 2012 2013 Revenue Loss 10
Slide 11: Performance highlights
Performance highlights For personal use only 12 months to 12 months to Increase March 2013 March 2012 Operating revenue 39,033 19,370 102% Total revenue & grant income 39,969 19,771 102% Operating expenses* (51,407) (26,491) 94% EBITDA (11,438) (6,720) 70% Net loss after tax (14,443) (7,904) 83% Cas
Slide 12: Outlook for FY14
Outlook for FY14 For personal use only Xero is delivering on its plans and with substantial cash resources will continue its growth agenda to create long term shareholder value by building a global Software as a Service (SaaS) company. The company’s focus this coming year is on scalability as we dri
Slide 13: 3. Market observations
For personal use only 3. Market observations 13
Slide 14: Technology shift to a new trillion dollar market
Technology shift to a new trillion dollar market Mainframe was taken over by For personal use only And client/server will suffer as client/server a result of SaaS $1,200 $1,200 $1,066 $1,066 $1,061 Market capitalization US$B $1,000 $1,000 Mrkt capitalization US$B $800 $800 SaaS predicted Repeating t
Slide 15: Cloud segmentation
Cloud segmentation For personal use only Consumer Small business Enterprise Peaked ? Emerging Maturing Monetization: Non direct Direct Direct Sales model: Online Online Enterprise Complexity: Simple Complex Complex 15
Slide 16: Market observations
Market observations For personal use only Start-ups Incumbents - MYOB, Sage, Intuit Start-ups don’t have resources to Expected competitors have Software companies, not internet companies, compete long term. not emerged, no one else significantly funded. struggling with cloud transition. Building fea
Slide 17: MYOB (Australasia)
MYOB (Australasia) Huge debt with revenue challenges For personal use only • NZ and AU markets only. “Calling this ‘2nd generation cloud’ is like calling regular postage ‘2nd generation email’. Sure, today’s • Purchased by Bain fund for AU$1.3b (800 staff). mail systems are far more ‘electronic’ and
Slide 18: Sage (UK & global)
Sage (UK & global) Encumbered by a legacy business model and fragmented desktop solutions For personal use only • Thirty months since the launch of SageOne in the “Cloud is characterised by a land grab at present UK. and Sage is, in our view, ceding territory. Fundamentally, if Sage cannot win in th
Slide 19: Intuit (US & global)
Intuit (US & global) Driving cloud adoption across their customer base For personal use only • Focussed growing addressable market for small "I admire them. I think Rod Drury and the team business accounting. have built a really good company, they have built • Robust strategy. a very easy and compel
Slide 20: 4. Growth strategy
For personal use only 20 4. Growth strategy
Slide 21: SaaS growth
SaaS growth For personal use only Courtesy of David Skok, Matrix Partners* The growth impera.ve: • SaaS revenue comes over an extended period of .me. • Low churn in customers = long term revenue. • SaaS businesses face significant losses in the early years. • SaaS requires heavy upfront investment to
Slide 22: Aspirational cloud business models
Aspirational cloud business models For personal use only Analyst Day” September 2012 Reference “Salesforce Dreamforce 22
Slide 23: Comparative revenue growth rates
Comparative revenue growth rates For personal use only sfdc 4 3 4 35% (US$24.8b) wday 5 2 104% (US$10.5b) Xero 5 102% (US$1.2b) ns 8 2 31% (US$6.5b) 0 2 4 6 8 10 12 Years Yrs to $20m Yrs to $100m Years to $1b % current growth rate YoY (USD valuation May 2013) 23
Slide 24: Xero growth drivers
Xero growth drivers For personal use only Channel & Network Product Customer Business Model Building presence, Disrupt category with Delight customers to High margin, ecosystem & advocates in innovation. drive network scalable SaaS chosen markets. GTM Additional services. effects. model. model for s
Slide 25: Online accounting journey
Online accounting journey For personal use only small business payment graph platform group buying business network smart notifications Electronic Data Interchange (EDI) invoicing portal bank feeds connected benchmarking multi-user payments leads and opportunities anywhere online mobile anytime 25
Slide 26: Xero platform
Xero platform For personal use only Xero Practice Studio Practice Beautiful accounting for Xero Integrated accounting small businesses, Studio tools including: anywhere, anytime Financial reporting, General Ledger, Banking, Practice Management, Bills, Purchases, Workpapers and Fixed Assets, Expense
Slide 27: In the hands of a million+ customers
In the hands of a million+ customers For personal use only 1,000,000+ 157 78 36 6 17 0 2009 2010 2011 2012 2013 Goal 27
Slide 28: Transforming the accounting industry
Transforming the accounting industry For personal use only 28
Slide 29: Subscription pricing
For personal use only Subscription pricing 29
Slide 30: Channel and network effects
Channel and network effects For personal use only Small Accountants Businesses & Advisors Large Banks & Businesses Financial Institutions Add-ons Tax Authorities 30
Slide 31: Add-on application growth
Add-on application growth For personal use only 200+ pre-integrated applications provide a comprehensive small business ecosystem 428 228 113 45 1 5 14 2008 2009 2010 2011 2012 2013 2014 31
Slide 32: Delighted customers
Delighted customers For personal use only • Education approach proving successful with channel and customers. • Support centered in NZ with satellite offices now in UK and soon in Denver for US payroll, tax and market specialists. • Low customer churn - mid to low teens per annum. • CPA Practice Advi
Slide 33: The road to a million+
The road to a million+ For personal use only Current Xero Small Current market Sample market Implied market Country customers (Mar 13) businesses share share share New Zealand 73,000 455,000 16% 120,000 26% Australia 51,000 2,000,000 3% 350,000 18% United Kingdom 22,000 4,300,000 <1% 170,000 4% Unit
Slide 34: US execution
US execution For personal use only Product Channel Growth Xero platform Accountants & online Team & customers • Localized product. • Building accountant channel in CA. • Year one growth exceeds other • Engaged Xero Advisor Panel driving Presence in San Francisco and LA. countries for customers and p
Slide 35: Accelerated investment for growth
Accelerated investment for growth For personal use only Opportunity Investment focus Product Grow development teams to • Deliver full horizontal product accelerate disruption with • Integrate accounting practice management tools innovation on multiple fronts • AU Tax features and US Payroll • Mobile
Slide 36: Cloud investment landscape (USD)
Cloud investment landscape (USD) For personal use only Salesforce $24.8b t e a Workday Inc $10.5b Priv Success Factors $3.4b (SAP) l ic b Pu Netsuite $6.5b Square $3.2b Tableau $3.1b Yelp $1.9b Yammer $1.2b (MSFT) $1.2b Key competitors Box $1B Intuit 8,500 staff, $17.5b Marketo $0.8b Sage 13,500 sta
Slide 37: Incredibly well positioned
Incredibly well positioned For personal use only Massive opportunity Strategy Execution Grow business to global scale Product Channel & Network >500m Wall of innovation small businesses Xero Strategy Focus on customer acquisition & revenue Customer Business Engineer high margin Model SaaS model “...
Slide 38: Questions
For personal use only 38 Questions
Slide 39: Appendix: About Xero
For personal use only Appendix: About Xero 39
Slide 40: Public company
Public company For personal use only • Approximately 4,700 shareholders (900 new shareholders since Mar 2013) • 89% of investors hold less than 10,000 shares each • 47% of shares held by Directors & staff • 117m shares on issue, average daily trading volume of around 150,000 shares • NZX50, Market c
Slide 41: Capital raised
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 20,000 Feb 2012 Knowles & Craig Winkl
Slide 42: Xero Board
Xero Board 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 and