Interim Report & Appendix 4D H1 FY22

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Appendix 4D

11 November 2021

Xero Limited

ARBN 160 661 183 (incorporated in New Zealand)

Reporting period	6 months to 30 September 2021
Previous reporting period	6 months to 30 September 2020

Results for announcement to the market

	Amount (000s)	change
Revenues from ordinary activities	NZ$505,703	up 23%
Net loss from ordinary activities	NZ$(5,922)	NM*
Net loss attributable to security holders	NZ$(5,922)	NM

*NM stands for not meaningful

The Company does not propose to pay a dividend and no dividends were declared or paid for the reporting period.

Net tangible assets per share was NZ$0.83 per share at 30 September 2021 (30 September 2020: NZ$1.02 per share).

For additional Appendix 4D disclosure requirements refer to the financial statements contained in Xero Limited's Interim Report for the 6 months ended 30 September 2021.

Authorised for release to the ASX by the Chair of the Board and the Chair of the Audit and Risk Management Committee.

Xero Limited (XRO)	Registered Address	www.xero.com
NZ Company no. 1830488	19-23 Taranaki St
ARBN 160 661 183	Te Aro
	Wellington 6011

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XERO LIMITED

Interim Report

2022

For personal use only

Contents

Highlights

Chair & CEO Review

Our Performance

Independent Auditor's Review Report

Interim Financial Statements

Directors' Declaration

Corporate Directory

1

2

7

22

23

39

40

Right: Xero team members, New Zealand

For personal use only

Highlights

$505.7m

Operating revenue

Up 23% YOY

$1.1b

Annualised monthly recurring revenue Up 29% YOY

87.1%

Gross margin percentage

Up 1.4PP YOY

$1.2b

Total available liquidity

Cash on hand, short-term deposits and undrawn committed debt facilities

1

3.013m

Subscribers

Up 560,000 YOY

$9.9b

Total subscriber lifetime value

Up $3.8b YOY

$6.4m

Free cash flow

Down $47.9m YOY

$98.1m

EBITDA

Down $22.7m YOY

CHAIR AND CEO REVIEW

2

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Chair and CEO Review

David Thodey AO	Steve Vamos
Chair	Chief Executive Officer

Dear Shareholder,

Small businesses around the world are increasingly using digital tools as they adapt to a changing operating environment. We see this reflected in Xero's half-year 2022 (H1 FY22) performance, where we delivered strong revenue and subscriber growth, and made progress executing our strategic priorities. While we continue to monitor the macroeconomic environment, we are confident small businesses will continue to be a driver of global economic recovery, and cloud-based software applications will be essential in helping them adapt and succeed during this critical time.

For

The opportunity ahead for Xero is significant, and in particular, we see substantial room for growth in our international markets. We estimate that in the markets in which Xero currently operates, the Total Addressable Market is more than 45 million small businesses1. People are also discovering connected apps that further streamline their business operations and make their lives easier. We will continue

to invest in cloud-based tools to meet the needs of our customers around the world.

There are multiple drivers of the adoption of cloud-based software, including the digitisation of tax compliance, and innovation in access to financial services, which point to an exciting landscape ahead for Xero.

Governments are helping to lead the way. In Australia, the Government's Digital Economy Strategy is aimed at boosting digital capability and adoption among small businesses, evidenced by initiatives such as Open Banking and e-invoicing. The US and Canada are moving toward

Open Banking. The UK is pushing to further digitise the tax system and simplify small business tasks through Making Tax Digital. Singapore is also promoting e-invoicing and offering incentives for small businesses to adopt technology through its SMEs Go Digital program.

Xero's unique position means we can provide anonymised, aggregated data and generate insights about the small business economies in our largest customer markets. One of the ways we use this information is in our engagement with governments and regulators to advocate for small business, and support publication of academic research. This is driven through Xero Small Business Insights, which was enhanced during the first half of FY22 with the launch of a composite Small Business Index that shares a perspective on sector and geographical trends.

1Estimated TAM across English speaking addressable cloud accounting markets, based on publicly available data