Xero Limited · ASX:XRO
Xero — Investor Presentation (November 2021)
31 slides from Xero's investor presentation, Nov 11, 2021
Slide 1: Investor briefing
Investor briefing Half year results to 30 September 2021 11 NOVEMBER 2021
Slide 2: Important notice
Important notice This presentation is given on behalf of Xero Limited (Xero) (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 • includes statements relating to past performance, which shou
Slide 3: Agenda
Agenda Business update Financial results Outlook Q&A Steve Vamos Kirsty Godfrey-Billy CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER 01 02 03 04 3
Slide 4: Business update
Business update Steve Vamos CHIEF EXECUTIVE OFFICER
Slide 5: Strong H1 FY22 result across multiple metrics
Strong H1 FY22 result across multiple metrics Financial and operating performance highlights for the half year ending 30 September 2021 SUBSCRIBERS ARPU AMRR TOTAL LIFETIME VALUE 3.013m $31.32 $1,132.5m $9.9b + 560,000 YOY + 5% YOY (7% in + 29% YOY (32% in + $3.8b YOY constant currency) constant cur
Slide 6: Sustained revenue growth momentum
Sustained revenue growth momentum Revenue composition +23% YOY (26% cc) Core accounting Platform +21% YOY $506m Other (19% cc) • Group operating revenue +32% YOY grew 23% YOY, or 19% $410m 2% (33% cc) +22% YOY excluding revenue from 11% acquired businesses +37% YOY +104% YOY $339m 3% (33% cc) 87% •
Slide 7: Australia and New Zealand highlights
Australia and New Zealand highlights $297M REVENUE (+20% YOY) 158K NET ADDS 1.72M SUBSCRIBERS (+20% YOY) Australia New Zealand H1 FY22 Δ YOY H1 FY22 Δ YOY 1 Revenue $225m +22% Revenue $72m +13% Net additions 124k +24% Net additions 34k +55% Winners Subscribers 1.24m +22% Subscribers 480k +16% Cansta
Slide 8: International highlights
International highlights $209M REVENUE (+28% YOY) 114K NET ADDS 1.29M SUBSCRIBERS (+26% YOY) United Kingdom North America Rest of World H1 FY22 Δ YOY H1 FY22 Δ YOY H1 FY22 Δ YOY 1 2 3 Revenue $133m +24% Revenue $30m +5% Revenue $46m +72% Net additions 65k +160% Net additions 23k +130% Net additions
Slide 9: Platform activity indicators rising
Platform activity indicators rising Three largest contributors of platform revenue in H1 FY22 show increasing activity levels over the last 12 months Planday users 1 Employees paid through Total payment value 3 Xero Payroll2 160 160 160 140 140 140 Indexed to Sep-20 Indexed to Sep-20 Indexed to Sep-
Slide 10: Investing in our strategy: people and product
Investing in our strategy: people and product Product and Bank reconciliation, technology teams tax and reporting Hiring, with a focus on product Enhanced bank rec with smarter and technology, grew total FTEs algorithms leveraging AI capabilities 30%1 YOY to 4,187 FTEs Improved tax and reporting fea
Slide 11: Investing in our strategy: Xero App Store
Investing in our strategy: Xero App Store The Xero App Store is the next evolution of the Xero App Marketplace, moving towards a more commercial model, with new, enhanced features for small business customers, partners and ecosystem app partners, to progress our platform strategy APP PARTNER BENEFIT
Slide 12: Investing in our strategy: inventory and ecommerce
Investing in our strategy: inventory and ecommerce STRATEGIC Grow small business platform Drive cloud accounting PRIORITIES CATEGORY Inventory management and ecommerce OPPORTUNITY Supporting increased inventory and ecommerce needs of customers √ Acquisition of Working with LOCATE Inventory ecommerce
Slide 13: Strategic priorities
Strategic priorities Drive cloud Grow small Build accounting business for global platform scale and innovation 13
Slide 14: Financial results
Financial results Kirsty Godfrey-Billy CHIEF FINANCIAL OFFICER 14
Slide 15: Strong financial performance with continued investment in the long term
Strong financial performance with continued investment in the long term AMRR EBITDA Free cash flow $1,132.5m $98.1m $1,250m $125m $120.8m $100m $1,000m $100m $80m +29% -19% $54.3m $64.9m $60m $750m $877.6m $75m $6.4m $764.1m $40m $500m $50m $4.8m $589.1m $20m $250m $25m -$9.8m $0m -$47.9m $16.8m $0m
Slide 16: Uplift in lifetime value of subscribers
Uplift in lifetime value of subscribers Total LTV over time LTV movements by driver • LTV 5 year CAGR was 38% for ANZ and 56% for International From 31 March to 30 September 2021 • Average customer lifetime of 9.5 years $10b $3.8b 9.94 added 0.18 -0.02 $12b International $9b ANZ 9.9b 0.10 0.85 $9b 0
Slide 17: Higher ARPU, lower churn helping drive LTV uplift
Higher ARPU, lower churn helping drive LTV uplift 1 ARPU movement contributors Churn ARPU has increased by just over $2 since 31 March 2021 All markets recorded lower churn ARPU at 31 March 2021 $29.30 1.40% Price changes 1.13% 1.11% 1.15% 1.10% 1.10% 1.10% Product mix and other 1.01% 0.88% 0.90% M&
Slide 18: Improved gross profit with normalising expenses
Improved gross profit with normalising expenses Gross profit and gross margin percentage Operating expenses as a % of revenue Gross profit Sales and marketing Gross margin percentage Gross profit Product design and development +25% YOY General and administration $440m $500m 100% 84.1% 80.5% 83.4% $3
Slide 19: Financial performance
Financial performance H1 FY21 ($000s) H1 FY22 ($000s) Δ YOY (%) Operating revenue growth of 23% YOY (26% constant Total operating revenue 409,837 505,703 23% currency), driven primarily by subscriber growth across all markets Cost of revenue (58,676) (65,286) 11% Operating expenses, inclusive of acq
Slide 20: Total liquid resources of $1.2 billion
Total liquid resources of $1.2 billion Net cash position decreased by $52.6m YOY to Movement in net cash position $125.0m at 30 September 2021 H1 FY21 H1 FY22 Δ YOY Total available liquid resources at 30 September ($000s) ($000s) ($000s) 2021 of $1.2b, inclusive of $150m of undrawn committed debt fa
Slide 21: Outlook
Outlook Xero will continue to focus on growing its global small business platform and maintain a preference for reinvesting cash generated, subject to investment criteria and market conditions, to drive long-term shareholder value. Total operating expenses (excluding acquisition integration costs) a
Slide 22: Q&A
Q&A Steve Vamos CHIEF EXECUTIVE OFFICER Kirsty Godfrey-Billy CHIEF FINANCIAL OFFICER
Slide 23: Appendix
Appendix 23
Slide 24: Subscriber growth trend
Subscriber growth trend Closing subscribers from H1 FY19 to H1 FY22 +23% YOY +20% YOY Australia +19% YOY 3.01m +26% YOY 2.74m New Zealand +30% YOY 2.45m 201k 2.29m 308k United Kingdom +31% YOY 175k 2.06m 136k 285k +32% YOY 785k North America 1.82m 125k 251k 720k Rest of World 1.58m 99k 241k 83k 638k
Slide 25: SaaS metrics summary
SaaS metrics summary ANZ International Group FY20 H1 FY21 FY21 H1 FY22 FY20 H1 FY21 FY21 H1 FY22 FY20 H1 FY21 FY21 H1 FY22 ARPU $29.83 $30.79 $31.23 $31.38 $30.05 $28.44 $26.74 $31.25 $29.93 $29.81 $29.30 $31.32 CAC months 9.7 9.1 8.9 9.1 18.1 22.0 22.4 19.5 14.0 14.9 14.8 14.2 Churn 0.84% 0.83% 0.7
Slide 26: Recent acquisitions FY21 to H1 FY22
Recent acquisitions FY21 to H1 FY22 ACQUISITION Invoice lending E-invoicing technology Workforce Cloud-based platform leveraging providing connections management platform inventory customers’ to the Peppol global for employers management accounting data e-invoicing network and employees provider Com
Slide 27: Financial performance
Financial H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 performance ($000s) ($000s) ($000s) ($000s) ($000s) Total operating revenue 338,658 379,573 409,837 438,945 505,703 Gross profit 288,517 323,132 351,161 378,728 440,417 Gross margin 85.2% 85.1% 85.7% 86.3% 87.1% Overview of financial performance from
Slide 28: Exchange rates
Exchange rates The table below outlines the principal exchanges rates used in the current and prior period Six months ended/ as at 30 September 2021 2020 Average rate Closing rate Average rate Closing rate NZD / AUD 0.941 0.956 0.933 0.924 NZD / CAD 0.880 0.876 0.869 0.882 NZD / EUR 0.594 0.592 0.56
Slide 29: Glossary
Glossary AMRR Constant currency (cc) Liquid resources Annualised monthly recurring revenue (AMRR) represents Constant currency comparisons for revenue are based on average Liquid resources comprises cash and cash equivalents, monthly recurring revenue at 30 September, multiplied by 12. exchange rate
Slide 30: Contact
Contact Toby Langley Kate McLaughlin INVESTOR RELATIONS COMMUNICATIONS toby.langley@xero.com kate.mclaughlin@xero.com +61 450 223 995 +64 27 533 4529 Mentorloop, Australia 30
Slide 31: Beautiful business
Beautiful business xero.com/investors