Slide 1: Investor Briefing: Half year results to 30 September 2020
Investor Briefing Half year results to 30 September 2020 12 NOVEMBER 2020 Mentorloop | Australia
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 Financial Outlook Q&A update results 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 Orenda Tribe + CV Ledger | United States 4
Slide 5: Revenue growth with operational discipline in challenging conditions
Revenue growth with operational discipline in challenging conditions Financial and operating performance highlights for the six months ending 30 September 2020 SUBSCRIBERS ARPU AMRR TOTAL LIFETIME VALUE 2.453m $29.81 $877.6m $6.2b + 396,000 YOY - 4% YOY (-3% in + 15% YOY (15% in + $0.8b YOY constant
Slide 6: Supporting our customers and partners
Supporting our customers and partners Ok Ok Prioritised product Continuing to connect Helping to navigate development and delivery and share through COVID-19 - Enhanced Starter plan better - Helping our people do their best - Payroll enhancements in response to tailored to customer needs work in sup
Slide 7: Customer metrics show value of Xero to subscribers
Customer metrics show value of Xero to subscribers Monthly MRR churn1 Weekly subscriber login Total monthly payment activity2 since Jan 20 (indexed) value3 since Jan 20 (indexed) H1 FY20 H1 FY21 Δ YOY 140 140 120 120 Indexed to Mar 20 Indexed to Mar 20 ANZ 0.82% 0.83% 0.01% 100 100 80 80 Internation
Slide 8: Strategic priorities
Strategic priorities Drive cloud Grow small Build accounting business for global platform scale and innovation Ok 8
Slide 9: Drive cloud accounting
Drive cloud accounting Australia New Zealand United Kingdom North America Rest of World H1 FY21 Δ YOY H1 FY21 Δ YOY H1 FY21 Δ YOY H1 FY21 Δ YOY H1 FY21 Δ YOY SUBSCRIBERS 1.01m +21% 414k +13% 638k +19% 251k +17% 136k +37% NET ADDITIONS1 100k -12% 22k +38% 25k -66% 10k -50% 11k -31% REVENUE $184m +18%
Slide 10: Australia and New Zealand highlights
Australia and New Zealand highlights Australia New Zealand - Became first Xero geography to pass through one million - Subscriber net additions reaccelerated for the first time against prior subscribers milestone year since H2 FY17 - Worked closely with Australian Taxation Office to assist small - D
Slide 11: International highlights
International highlights United Kingdom North America Rest of World - UK Government revised compliance dates for - Continued growth in estimated partner channel - Range of government initiatives helping to MTD for VAT (second phase) of April 2022, and capacity to over 1.5 million small businesses, d
Slide 12: Grow the small business platform
Grow the small business platform H1 FY21 H1 FY21 revenue growth YOY revenue composition 24% 21% 21% Group Group operating operating revenue revenue $409.8m growth 6% 1 Core Platform 3 Core accounting 91% 1 2 WorkflowMax accounting revenues 2 Platform revenues 3 WorkflowMax Non-recurring revenues dec
Slide 13: Build for global scale and innovation
Build for global scale and innovation Talent acquisition continued Optimisation of operational Embedding SEI activities across the business to throughout the period in line and financial structure to meet deliver sustainable long-term growth with strategic objectives strategic needs of the business
Slide 14: Financial results
Financial results Kirsty Godfrey-Billy CHIEF FINANCIAL OFFICER Link Pro | Hong Kong 14
Slide 15: Resilient business model, responsive spending and investment plan
Resilient business model, responsive spending and investment plan AMRR EBITDA Free cash flow $877.6m $54.3m $120.8m $1,000m $150m $60m $750m +15% $40m +49.4m $764.1m $100m +86% $500m $20m $589.1m $50m $64.9m $250m $0m $4.8m $16.8m -$9.8m $0m $0m -$20m H1 FY19 H1 FY20 H1 FY21 H1 FY19 H1 FY20 H1 FY21
Slide 16: Unit economics and track record of value creation
Unit economics Value of a Xero subscriber AT 30 SEPTEMBER 2020 and track record $2,500 $2,000 LTV/CAC of value creation $1,500 $1,000 5.7 LTV $2,516 $500 September 2020 Δ YOY CAC $0 $445 ARPU $29.81 $-500 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 MRR churn 1.11% Gross margin 86% LTV pe
Slide 17: Steady gross margin, reduced CAC spend and continued product investment
Steady gross margin, reduced CAC spend and continued product investment prioritisation Gross margin CAC as % of revenue Product costs including opex and capex, as % of revenue 1 100% 50% 45.1% 50% 43.1% 85.7% 34.1% 90% 85.2% 40% 31.9% 40% 82.8% 31.3% 32.1% 80% +0.5pp 30% 30% +2.0pp -11.2pp 70% 20% 2
Slide 18: Contribution margins uplift across segments
Contribution Australia and New Zealand contribution margins uplift $ 169m across segments $200m $150m $100m Australia and New Zealand contribution improved 29% YOY, exceeding revenue growth of 17% YOY due $50m to continued operating discipline and scale benefits combined with robust subscriber growt
Slide 19: Financial performance
Financial H1 FY20 ($000s) H1 FY21 ($000s) YOY change (%) performance Total operating revenue 338,658 409,837 21% Gross profit 288,517 351,161 22% Operating revenue growth of 21% YOY Gross margin 85.2% 85.7% +0.5pp (19% constant currency), driven primarily by subscriber growth across all markets Sale
Slide 20: Total available liquid resources of $723 million
Total available Movement in net cash position liquid resources of $723 million H1 FY20 H1 FY21 YOY ($000s) ($000s) change ($000s) Cash and Positive free cash flow result in H1 FY21 of $54.3m, cash equivalents 110,898 222,016 111,118 equivalent to 13.2% of operating revenue Operating cash flow increa
Slide 21: Outlook
Outlook Xero is a long-term oriented business with ambitions for high-growth. We continue to operate with disciplined cost management and targeted allocation of capital. This allows us to remain agile so we can continue to innovate, invest in new products and customer growth, and respond to opportun
Slide 22: Q&A
Q&A Steve Vamos CHIEF EXECUTIVE OFFICER Kirsty Godfrey-Billy CHIEF FINANCIAL OFFICER Poplar Petfood | Australia 22
Slide 23: Appendix
Appendix noissue | New Zealand 23
Slide 24: SaaS metrics summary
SaaS metrics summary ANZ International Group H1 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 H1 FY21 ARPU $31.64 $30.79 $29.98 $28.44 $30.96 $29.81 CAC months 8.6 9.1 16.0 22.0 12.3 14.9 MRR churn 0.82% 0.83% 1.58% 1.53% 1.10% 1.11% Subscribers 1,207,000 1,428,000 850,000 1,025,000 2,057,000 2,453,000 LTV p
Slide 25: Glossary
Glossary Subscribers Constant currency Liquid resources Subscriber means each unique subscription to a Xero- Constant currency comparisons for revenue are based on Liquid resources comprises cash and cash equivalents, offered product that is purchased by a user (eg a small average exchange rates for
Slide 26: Contact
Contact Toby Langley toby.langley@xero.com INVESTOR RELATIONS +61 450 223 995 Kate McLaughlin kate.mclaughlin@xero.com COMMUNICATIONS +64 27 533 4529 26
Slide 27: Beautiful business
Beautiful business xero.com/investors