JUNE 2020 ' Xero update for ASX CEO Connect Steve Vamos Chief Executive O ffj cer Orenda Tribe | United States
Xero Today 2.285 million global subscribers 3,000+ employees Xero offices in 20 cities Xero is used in 180 countries 2
How we’re responding to COVID-19 Supporting our Helping Prioritised people to ensure customers and product their safety and partners with development wellbeing immediate needs • O ffj ces closed globally and • Xero Central as our main • Extending pilot access of all sta fg working from home customer support centre, Short-term cash flow and with a business continuity Business Snapshot features to • Remote working technology, hub for live webinars and all Business Edition customers communication tools and other targeted resources at • Simplifying and automating wellbeing support central.xero.com/s/business- payroll and tax changes • Restrictions on travel and continuity to help small business with in-person events, cancelled • A dedicated customer reporting data, proving Xerocon Sydney 2020, fully response team available 24/7 eligibility for and accessing virtual annual general meeting for case-by-case guidance government stimulus benefits • Deferral of planned price rise • In-product prompts and reminders to help stay on top • Ensuring quality and of government initiatives continuity of Xero’s cloud- based platform 3
The COVID-19 environment What are we seeing? What are we hearing? What are customers doing? Overall, Xero usage levels have remained Xero voice-of-customer surveys indicate Some actions small businesses are taking: relatively steady during 2020 calendar year, most have been significantly impacted by • Business continuity planning, protecting as measured by subscriber login activity COVID-19, with many foreseeing a negative employees business outlook Subscriber additions slowed towards the end • Managing cash flow and capital resources, of March 2020. All regions impacted with UK Main concerns of small business customers: accessing government stimulus packages to a greater extent • Managing cash flow • Widespread adoption of digital tools such as Initial analysis of Australian subscribers videoconferencing and e-commerce platforms • Digital tools and the need for rapid up-skill indicates sectors most impacted were • Adapting and pivoting business models and • Retaining and motivating sta fg hospitality, and arts and entertainment services to respond to new market dynamics • Work-life balance Weekly login activity YTD COVID-19 declared a pandemic by WHO Easter holidays Jan 20 Feb 20 Mar 20 Apr 20 Weekly total subscriber logins for first full seventeen 4 weeks of the 2020 calendar year
Continued global growth drives FY20 results SUBSCRIBERS ARPU AMRR TOTAL LIFETIME VALUE 2.285 m $ 29.93 $ 820.6 m $ 5.5 b + 467,000 YOY + 2% YOY (-1% in + 29% YOY (25% in + $1.2b YOY constant currency) constant currency) EBITDA NET PROFIT AFTER TAX FREE CASH FLOW OPERATING REVENUE $ 718.2 m $ 137.7 m $ 3.3m $ 27.1 m + $64.6m YOY + $30.5m YOY + $20.7m YOY + 30% YOY (29% in constant currency) 5
Xero’s global footprint Australia New Zealand United Kingdom North America Rest of World FY20 Subscribers 914k +26% 392k +12% 613k +32% 241k +24% 125k +51% $320m +23% $116m +19% $184m +54% $55m +25% $43m +43% Revenue >50% cloud adoption 1 <20% cloud adoption 1 6 1 Estimated adoption rates across English speaking addressable cloud accounting markets, based on publicly available data
Driving growth through the platform FY20 revenue FY20 revenue growth YOY composition 82% Group operating revenue $ 718.2m 30% Core accounting 33% Group 28% operating 1 Platform revenues revenue 19% growth WorkflowMax 2 89% Non-recurring 3 Core Platform Non- 2% 2% 7% WorkflowMax 2 accounting revenues 1 recurring 3 1 Platform revenues include revenue derived from related services, including adjacent products (such as Hubdoc), add-ons with incremental revenue (such as payroll and expenses modules), payments and revenue share agreements with partners 2 Revenues relating to WorkflowMax, online workflow and job management software 7 3 Non-recurring includes revenue from events (such as Xerocons and roadshows), and other non-subscription or platform services
Strategy on a page Purpose Vision WHY WE Make life better for people in small business, To be the most insightful and trusted EXIST their advisors and communities around the world small business platform #Challenge #Human #Team #Ownership #Beautiful VALUES Grow small Build for global scale STRATEGIC Drive cloud accounting PRIORITIES business platform and innovation Xero Our Customers Our People Long-term value creation by OUTCOMES Customers and partners are more Our people are doing the becoming the small business successful and confident on Xero best work of their lives platform of choice 8
Areas of planned strategic investment Grow small Build for global scale STRATEGIC Drive cloud accounting PRIORITIES business platform and innovation Best-in-class cloud accounting Small business needs beyond Attract, inspire and retain for small business accounting and compliance world class talent AREAS OF Extend access and distribution Payments and access to Robust technology to drive PLANNED to serve all small businesses capital innovation at speed INVESTMENT Serve small businesses with New applications leveraging Optimised operational and multi-lingual editions data, AI and machine learning financial structure • Improved scale and e ffj ciency • Increased adoption of cloud • Increased platform revenue indicators accounting within Xero’s contribution existing markets • Revenue from new product • Increased attach and usage of IMPACT launches • Extension into new segments ecosystem apps and financial and geographies services products • Disciplined capital allocation 9
Investing TAX Suggestion in great products, Code-free Integrated tax Better business Industry accounting prep and filing and cash flow recognition leveraging insights the Hubdoc bundled into all Xero Tax launched at no Business Snapshot and Xero recognised as a Business Edition plans extra cost through Partner Short-term cash flow leader in the IDC globally Program in UK pilots being extended to MarketScape: Worldwide ecosystem all Business Edition SaaS and Cloud-Enabled • Single sign-on with • Features include single customers Small Business Finance access from inside Xero sign-on, multi-user and Accounting • Business Snapshot review, e-signing, auto • Smarter, faster data Applications 2020 tax adjustments provides a simplified, capture from bills, Vendor Assessment 1 quick-access financial • Completed Corporation receipts and other metrics dashboard Read more at sources Tax and Accounts xero.com/about/ • Short-term cash flow Production for micro • Less manual data entry investors/idc-report entities, and small projects a 30-day bank and coding reduces companies abridged balance to help with errors, saves time accounts cash flow management • Simpler bank decisions • Preparing for MTD for reconciliation process Income Tax (personal tax, trusts, partnerships 1 doc #US45837020, and estates) 10 April 2020
Outlook While Xero has performed strongly in FY20, trading in the early stages of FY21 has been impacted by the COVID-19 environment. The continued uncertainty surrounding COVID-19 means it would be speculative for us to say anything more at this time on its potential impact on our expected performance for FY21. Xero’s ambition is to be a long-term oriented, high-growth business. 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, support our customers, and respond to opportunities and changes in our operating environment. 11
Q&A 12 Sidone | United Kingdom
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