Slide 1: Investor briefing: Full year results to 31 March 2017
Investor For personal use only briefing FULL YEAR RESULTS TO 31 MARCH 2017 11 MAY 2017 A LIT TLE FARM ON THE HILL , 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: CEO update, Financial results, Outlook, Strategic update, Q&A
For personal use only CEO update Financial results Outlook Strategic update Q&A 3
Slide 4: CEO update
CEO For personal use only update Rod Drury LIVINGSEAS, TIOMAN, SINGAPORE 4
Slide 5: 1,035,000 subscribers
318,000 For personal use only added in one year 1,035,000 subscribers 500,000 added in two years 2007 2017 5
Slide 6: Annualised committed monthly revenue $360m
For personal use only $102m added in one year $ 360m Annualised committed monthly revenue Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 6
Slide 7: Balanced investment, growth with operating efficiencies
Balanced investment For personal use only Growth with operating efficiencies ANNUALISED COMMITTED OPERATING NET LOSS EBITDA MARGIN TOTAL GROUP SUBSCRIBER MONTHLY REVENUE REVENUE AFTER TAX EXCL. SBP 3 LIFETIME VALUE $ 360m +51 % YoY 2 ( 69m) $ (6 ) % $ 2.2b +45% YoY 1 $295m Improved 16% YoY +16pp YoY +
Slide 8: Disciplined execution on unique global SaaS model
Disciplined execution on unique global SaaS model For personal use only DELIVERING INVESTING IN DRIVING OPERATING EXPANDING THE RESULTS LONG-TERM GROWTH EXCELLENCE ADDRESSABLE MARKET Subscriber growth AWS migration completed Improving gross margin New geographies – South East Asia Revenue growth Nex
Slide 9: Creating significant lifetime value
Creating significant Total group subscriber lifetime value (LTV) lifetime value For personal use only $2.2b Improved key underlying drivers of lifetime value $2.2b $688m added 1 March Progress from 2017 March 2016 Subscribers net adds 318,000 $1.5b $1.1b ARPU $29 CMR churn % 1.15% Gross margin 77% L
Slide 10: Financial results
Financial For personal use only results Sankar Narayan NEXBA , SYDNEY, AUSTRALIA 10
Slide 11: Financial performance
Financial FY16 ($000s) FY17 ($000s) YoY % change performance For personal use only Total revenue 207,060 295,389 43% Constant currency operating revenue Gross profit 157,179 226,004 44% growth of 51% YoY H2 FY17 gross margin was 78%. Gross Gross margin 76% 77% +1pp profit affected by AWS migration co
Slide 12: Growing ACMR with subscribers
Growing ACMR with subscribers For personal use only 12 month subscriber additions 1 Indexed 12 month ACMR growth 2 340 318k 269k 280 242k 222k Index 220 160 100 12 months 12 months 12 months 12 months 12 months 12 months 12 months 12 months ended Sep 15 ended Mar 16 ended Sep 16 ended Mar 17 ended S
Slide 13: Strong gross margin
Strong gross margin Gross profit as % of revenue For personal use only Delivered further improvements in gross margin following transition to AWS in Q3 FY17 Gross margin Gross margin of 77% for FY17, +1pp over prior excl SBP and D&A 1 year. Gross margin of 78% for H2 FY17 80% Expect continued improv
Slide 14: Customer acquisition efficiencies
Customer acquisition CAC as % of revenues efficiencies For personal use only Acquisition mix weighted towards partner channel with more than 100,000 business advisors 1 80% Continued efficiencies in sales and marketing 89% of Xero subscribers connected to a 65% business advisor 1 CAC months declined to
Slide 15: Leveraging product investment
Leveraging product Product costs including opex investment For personal use only and capex as % of revenue 1 Next phase of investment in realising benefits from AWS migration 50% Single global platform is driving investment efficiency and capability 45% Focus on: • Expanding TAM (sole trader and mediu
Slide 16: 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 0% • High gross margin • Improved CAC efficiencies EBITDA -20% • Product specif
Slide 17: 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 18: Contribution margin improving
Contribution Australia and New Zealand contribution margin improving For personal use only $60m $40m Group contribution improved $50.7m YoY in FY17 $20m Australia and New Zealand contribution for FY17 improved 91% over FY16 $0m H1 FY16 H2 FY16 H1 FY17 H2 FY17 International contribution loss declined
Slide 19: Australia and New Zealand
Australia and 692,000 subscribers New Zealand For personal use only 700,000 Market leader in small business accounting and 550,000 continue to win share from incumbents One third of New Zealand small businesses on the 400,000 platform and clear market leader in Australia Sep 15 Mar 16 Sep 16 Mar 17
Slide 20: United Kingdom
United Kingdom 212,000 subscribers For personal use only 220,000 Extending market leadership in subscribers and ACMR Highest number of banking integrations in the U.K. 160,000 Strongly positioned to capitalise on regulatory changes: HMRC Making Tax Digital and Payment Services Directive (PSD2) 100,0
Slide 21: North America
North America 92,000 subscribers For personal use only 100,000 Made key product improvements including launch of reporting centre and templates. Strengthened mobile offering across Android and iOS apps 70,000 Building scale and recognition in accounting channels with leading advisors such as H&R Bloc
Slide 22: Expanding global footprint
Expanding global footprint For personal use only SOUTH EAST ASIA Building momentum in fast growing markets with approximately two million subscribers TAM Broadening strategic bank collaborations: • DBS launching soon • CIMB Malaysia launched in April 2017 • HSBC Hong Kong and Singapore launched in M
Slide 23: Outlook
Outlook For personal use only POWERSMART SOLAR, TAURANGA , NEW ZEALAND 23
Slide 24: Operating efficiencies and cash usage 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 flow econo
Slide 25: Strategic update
Strategic For personal use only update Rod Drury XEROCON, BRISBANE, AUSTRALIA 25
Slide 26: Leadership team
Sankar Narayan Trent Innes CHIEF OPERATING AND AU MANAGING DIRECTOR For personal use only FINANCIAL OFFICER Anna Curzon CHIEF PARTNER OFFICER Craig Hudson NZ COUNTRY MANAGER Duncan Ritchie CHIEF PRODUCT & PLATFORM OFFICER Gary Turner UK and EMEA MANAGING DIRECTOR Rachael Powell Rod Drury CHIEF PEOPL
Slide 27: AWS migration complete
AWS migration complete For personal use only 24 MONTHS AGO 12 MONTHS AGO TODAY Discovery Prototype Build Team re-training Test Migrate Optimisation Innovation New applications 27
Slide 28: 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 ha
Slide 29: Accounting is ideal for machine learning
Accounting is ideal for For personal use only machine learning Access to vast amounts of training data Xero is getting smarter! High value domain We now suggest accounts based on what you’ve entered before. Any defaults you’ve setup will apply and you can override A clearly defined target structure
Slide 30: We can deliver code-free accounting
We can deliver code-free accounting For personal use only Small business owners no longer need to understand the technical aspect of accounting 30
Slide 31: Code-free accounting unlocks the addressable market further
Code-free accounting unlocks For personal use only the addressable market further Desktop accounting Cloud accounting Code-free accounting TOTAL ADDRESSABLE MARKET 31
Slide 32: Rapidly evolving competence in machine learning
Rapidly evolving For personal use only competence in machine learning ACCELERATING IMPLEMENTING Realtime management of multiple models, with reinforcement learning Platform migrated to public cloud and deployment EXPERIENCE Proliferation of ML and ML integrated with single application automation in
Slide 33: Continuing our accounting leadership
Continuing our accounting leadership For personal use only Double-entry Multi–perspective Relational accounting system general ledger reporting Currency in Cross practice Code-free the core reporting accounting 33
Slide 34: 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 35: 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 36: 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 37: Q&A
Q&A For personal use only HOT POD YOGA , HACKNEY, LONDON 37
Slide 38: Appendix
Appendix For personal use only KOKAKO CAFE, AUCKLAND, NZ 38
Slide 39: 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 40: Segment achievements
Segment achievements For personal use only Net change FY17 Net change (constant currency 2 ) Group 1.035 m +318 k Subscribers Growth across segments ANZ 692 k +194 k Int 343 k +124 k Operating revenue Group $295.4 m 43 % 51 % Operating revenue impacted ANZ $207.8 m 45 % 47 % by foreign exchange Int
Slide 41: Beautiful accounting software
For personal use only Beautiful accounting software www.xero.com