Xero Limited (XRO) Earnings Call Transcript & Summary

Kia Ora, and good morning from a West Auckland, New Zealand, and welcome to Xero's 2022 Annual Meeting. My name is David Thodey, and I am Chair of Xero's Board of Directors. Firstly, thank you for attending today's meeting. As with last year's annual meeting, we are completely online today, and I am with the Board here in our Auckland office while Steve joins us from our Denver office and Kirsty joins us from Wellington. While this online format may be familiar to those of you who joined our meeting last year, or, in fact, have joined other virtual meetings, I acknowledge that for others it might not be so. We have tried to design the procedures for this virtual meeting in a way that allows you the same opportunity to participate today as you would at a physical meeting. This includes being able to ask questions and vote using an electronic voting card. I'll discuss this process shortly. I also encourage you to download and refer to the online portal guide from the Download section at the bottom of your screen or from Xero's website if you haven't already done so. In the event that we experience technical issues that impact this meeting, I'll assess the circumstances and communicate further with you. If this isn't possible, you will be e-mailed instructions on how and when to rejoin the meeting. I'm now informed by our company's Secretary, that in accordance with the company's constitution, a quorum is present, and I now declare the meeting formally open. First of all, I'd like to introduce the Board who are participating today, and we have them joining from all over the world. Joining from Auckland are our directors, Rod Drury, Susan Peterson, Mark Cross, Dale Murray, Brian McAndrews and Lee Hatton. Now joining the meeting remotely from California is our Director, Steven Aldrich. From Xero's leadership team, we have our Chief Executive Officer, CEO; Steve Vamos, who joins us from Denver. And as I mentioned, our CFO, Kirsty Godfrey-Billy, who joins us from Wellington. And in Auckland, we have our Company Secretary on my right, Damien Coleman, and I'm pleased to say we're also joined by other members of Xero's leadership team and other Xero colleagues. Simon O'Connor and David Borrie from our auditors, Ernst & Young, are also present and available to answer any relevant questions directed to them. Xero's General Manager of Corporate Communications, Kate McLaughlin, will be reading out written questions submitted by shareholders during the meeting. So now let me turn to the agenda and the order of events for today. Firstly, I'm going to say a few words, and then we're going to hear from our CEO, Steve Vamos, then we'll turn to the formal business of the meeting, and we have 4 resolutions today. After that, there will be an opportunity for any general shareholder questions before I will close the meeting. Just before I give my address, I do want to go through a little bit more about the online platform. Voting on the resolutions will be conducted by poll, and that poll is now open. Please vote by using the electronic voting card you should receive after clicking the Get A Voting Card Button. Shareholders can submit written questions during the meeting by clicking on Ask a Question button. I encourage shareholders who have questions to submit them as soon as possible, including if you have questions about any of the resolutions. If you have any issues at all using the platform, please check the online portal guide which you can access through the download section at the bottom of your screen or from Xero's website or again, Contact The Phone help lines shown on this slide. This year, we've introduced a new option for shareholders to ask questions by telephone. To use this teleconference facility, shareholders must use their unique PIN P-I-N provided to them by Link Market Services. When you dial in, you'll be asked to mute your sound and listen to the meeting by phone. If you wish to ask a question, you will need to dial star 1 on your keypad. And this will indicate to the moderator that you wish to ask a question. The teleconference moderator will require your name, and at the relevant time, we'll introduce you and ask and prompt you to ask your question by unmuting your line. So I hope you got all those details. So let me now hopefully move to my address, and you've got all the ways that you can interact. Well, it's been another year of enormous change around the world for all of us; businesses, governments, economies, workplaces and our communities have all dealt with changes in the operating environment, including the geopolitical tensions that we now see and of course, the impact of living with COVID. The resilience, the tenacity and enterprise of small businesses around the world throughout this period has truly been inspiring. Many small businesses have navigated their way through this complex environment with agility and continue to respond to the evolving needs of their customers. However, we do expect to see another 12 months of volatility ahead. You all would know, energy prices have risen, supply chains remain constrained, contributing to levels of inflation we really haven't seen since the '80s. Interest rates are rising. Unemployment is at record lows, putting pressure on labor markets and global economic growth is predicted to slow. But despite these pressures, we are seeing small businesses continuing to be the employment engine room of nearly every economy around the world and their resilience is as strong as ever. Also, we're seeing governments with a new energy around their initiatives to incentivize small businesses to move to the cloud. This reflects the recognition of the productivity benefits that come from shifting to a digital economy, particularly when it comes to small businesses. And so let me just make a few comments as we look across our operating regions where we can see a range of policy tailwinds for this company. Firstly, starting with the U.K. and the making tax digital initiative and it's continuing to evolve presenting tremendous opportunities for our customers to file tax digitally so they can easily check income, expenses and profit. And more closer to us here in Australia, the newly elected government has committed to legislating the tech investment boost which will allow small businesses to deduct expenses from technology expenditure. Then again, in Canada, the government has recently announced the digital adoption program to help small businesses grow their online presence and open banking is gaining speed. In the U.S., while regulated open banking has not yet been announced, we are pleased that presidential support is explicit. While this implementation is slower than we had hoped, we do expect momentum to continue. Finally, looking to Asia and specifically to Singapore, the grant programs are supporting the adoption of technology solutions through allowing small businesses to claim support from the government for up to 70% of relevant costs. So as a global business, we have global aspirations. We continue to see the substantial opportunities for Xero's growth in the U.S., Canada and the U.K. And these government tailwinds really help us see that. And we see further growth in our more established markets of Australia and New Zealand. So we remain optimistic about the market opportunities for the Xero product portfolio. Cloud-based accounting is fundamental to the success of small businesses. Governments need to digitally enable their economies and collect revenues faster. Our products continue to improve the lives of our customers and partners around the world. While we will have fluctuations in the performance of the company from period to period, the underlying market opportunity for our product remains very large and exciting. We believe that Xero is well positioned to capitalize on this fundamental trend of small businesses moving to the cloud, and in doing so, to generate value for all of our stakeholders. I also want to just briefly touch on our performance before Steve talks to the specifics of our 2022 financial year results. We continue to make good progress in executing on our financial and strategic objectives to grow our business and build further operating discipline. You can see evidence of this in the delivery of another strong result with continued top line momentum double-digit subscriber growth and further reduction in churn rates. While we are conscious that the market's view of high-growth companies has changed over the last 6 months, the revaluation has impacted us in a similar way to our peers. I trust that you can see from our results, the fundamentals for our company remain strong, and we remain positive about the opportunities ahead. But in that -- looking at that future, we do understand that building and maintaining trust is at the heart of our business and underpins the many ways we create long-term value for our stakeholders. To generate trust at Xero, we aim to be transparent with our partners, our shareholders, employees and of course, customers. One way we are doing this is through greater openness in our reporting with the inclusion of enhanced nonfinancial disclosures in this year's annual report. This is an important step towards aligning our reporting with the integrated reporting framework. Using data responsibly is also very important in earning customers' trust. In financial year '22, we made public our company-wide pledge to use data responsibly. This included 8 responsible data use commitments that help guide every decision that involves the use of data. We protect our customer data with a multilayer risk-based approach that leverages cutting-edge security technology and a robust risk management process. This is very important. Customer data lies at the heart of Xero's vision to be the most insightful and trusted small business platform. Growing in a sustainable way is also an important consideration within our strategy, and it is integral to who we are. There are 2 areas we are especially focused on that I'd just like to briefly touch on. These are climate on the first hand and then diversity and inclusion. Firstly, on climate. Last year, we outlined our intent to develop an environmental road map aligned to the task force and climate-related financial disclosures, or TCFD, TCFD framework. We continue to progress our disclosures this year. We are now a registered supporter of TCFD and have developed a road map to implement its recommendations across our business. I encourage you to read our reporting on the journey we are undertaking, which is available on our website. We are pleased to have maintained carbon-neutral certification, and we continue to look at ways to better understand and minimize our emissions. An important step we intend to take in financial year '23 is to formalize our emissions reduction plans and set targets. We have work underway in this area and a focus on ensuring our plans are appropriate and sustainable for the long term. Now moving to diversity inclusion. In financial year '22, we've made good progress towards understanding the ethnic diversity of our employees. Pleasingly, Xero maintained its inclusion in the Bloomberg Gender-Equality Index in 2022. And for our third consecutive year, we have been on that index and we exceeded our existing targets for gender representation. We have also implemented more ambitious diversity targets. However, there is more work to do, and we look forward to creating a more ethically diverse and inclusive team across all levels of our organization. We actively seek a diverse pool of candidates for roles at Xero and promote a culture of inclusion to help our people feel valued and respected and to have a sense of belonging and fairness. We are all accountable for creating an inclusive culture and are committed to supporting flexible work and equal pay for equal work. Now turning to the Board. We're delighted to welcome Brian McAndrews as an independent Nonexecutive Director who joined us on the 2nd of February this year. Brian brings to the Board extensive public company technology experience, along with expertise in leading North American-based technology businesses to scale, and you'll hear from Brian later in the meeting. I'd like to recognize and thank all my directors, fellow directors for their contribution throughout the year. We continue to focus on how best to enable Xero to scale internationally while never losing our focus on delivering great products and great customer service. Finally, on behalf of the Board, I'd like to thank Steve and the Xero leadership team for another year of strong performance. We are also immensely grateful for the dedication and passion shown by all Xero's peoples, which is fundamental to the continued success of this organization. I'd also like to thank you, our shareholders, for your ongoing support. So that brings me to the end of my address. Let me now hand over to Steve in Denver before we commence the formal business of the day. So Steve, over to you.

Well, thank you, David, and hello, everyone. It is great to be joining you all for our annual meeting. I am joining you today from our office in Denver before I head to New Orleans for our Xerocon here in North America. My time in the U.S.A. follows time in the U.K. for our first Xerocon there in well over 2 years and in Canada, where it was really great to spend time with our people and partners. Today, I'm going to summarize Xero's financial year 2022 results and also briefly discuss the progress we've made executing our strategy. Our performance in FY '22 was strong in what was another important year for Xero. The group's revenue profile rebounded, and our SaaS metrics, a measure of the value of our customer base remains strong. The investment we have made in our business over a number of years to pursue the large opportunity in front of us is reflected in this outcome. We are confident in our ability to continue to drive cloud accounting adoption and grow the Xero's small business platform, in part, supported by the government initiatives that David touched on. Now turning to the details of our FY '22 results. Xero's total subscribers increased by 530,000 to reach more than 3.2 million at the end of March. Our operating revenue exceeded the milestone of $1 billion, climbing 29% year-on-year. This included a 5% benefit from acquired businesses. Annualized monthly recurring revenue, or AMRR, grew to exceed $1.2 billion, increasing 28%, largely reflecting subscriber growth of 19% and higher ARPU. Growth in ARPU of 7% versus the prior year was a positive outcome, reflecting price increases during the year and benefits from acquisitions and platform revenue growth. Additionally, churn declined over the year across all regions by 11 basis points to 0.9% over the course of the year. EBITDA increased 11% versus the prior year to $213 million reflecting a balance between gross margin expansion, which increased to 87.3% and increased operating costs in line with our outlook for the year. To summarize, our customer base is growing, they're staying with us longer and they're spending more with us. And you can see this in our total lifetime value, which increased 43% year-on-year to $10.9 billion. I'd just like to take an opportunity to provide an update on our performance year-to-date. While revenue growth is in line with our expectations in each market and our overall level and our customer base is growing, net subscriber additions in the U.K. have remained more subdued than we'd like. Our performance in the U.K. continues to be impacted by slower-than-expected uptake of the final stage of MTD for VAT and changes that we have implemented to our partner sales approach organization and territory assignments, which we strongly believe will benefit our partners and business despite some short-term impact on partner channel productivity. We are very well positioned in the U.K. market. It's an important growth opportunity for us. And despite a less than buoyant macro environment, we continue to drive and aspire to strong revenue and subscriber growth. The momentum generated from Xerocon London along with the positive feedback from our partners following the launch of Xero Go gives us great encouragement. I'll now update you on the progress we've made executing our strategy. We have 3 strategic priorities: to drive cloud accounting, grow the small business platform and to build Xero for global scale and innovation. We made good progress against each of these priorities in FY '22. On driving cloud accounting, we've delivered strong subscriber growth across all our regions. We see substantial opportunity for Xero's growth in the U.S., Canada and the U.K. as well as continued growth in our established markets. We continue to make good progress in growing a small business platform with investments to extend our ecosystem and customer usage of applications and services enabled by our recent acquisitions. Platform revenues grew to 11% of total revenue in FY '22, up from 7% in the prior year. We continue to think carefully about how to scale effectively through investing in our people, systems and processes. We remain disciplined with our investment decisions to ensure they achieve the intended outcomes to add value for all our stakeholders. Now despite the tight labor market, we did well in attracting talent to Xero. We increased total FTEs by more than 1,000 in FY '22, predominantly in product and technology, reflecting the strength of our employee value proposition. Now what you see in Xero today is the result of investments made over many years. The investments we're making now are crucial to realizing significant long-term growth opportunities we have. With that in mind, I do want to remind you of the areas of investment we called out at the full year result. And these investments include products for customers with less complex needs such as our recently launched mobile-based product Xero Go for self-employed, deeper product localization in North America and U.K., embedding recent acquisitions such as Planday, which we expect to launch at the end of this year in Australia, and continuing our work to modernize and to invest in our technology platforms to enable our aspirations for the future. The timing and the contribution from these investments will differ depending on a number of factors such as macro conditions in regions, timing of government initiatives and timing of delivery. We'll provide more insight on the nature of these investments and key delivery milestones as we go forward. At the same time, we do need to be conscious that we need to grow Xero sustainably. And as David mentioned, we must consider our social environmental impact and also uphold good governance. Now doing so is key to maintaining stakeholder trust as we scale and grow our business. Looking ahead, I'm confident the work we've done to execute our strategy this year will contribute strongly to delivering on the opportunity ahead Xero. I'd now like to just briefly touch on changes to our leadership team. In April 2022, we appointed Chris O'Neill to the Xero leadership team as Chief Growth Officer based in the U.S. responsible for Xero's Applications and Services division and our business in the Americas, which includes U.S. and Canada. And also after more than 3 years in his role as President of our business in the Americas, Tony Ward is relocating back to Australia with his family, and we'll leave Xero at the end of August. We sincerely thank Tony, appreciate the important contribution to our business that he has made and the strength of leadership he's brought to our teams in the region. Thank, Tony. I also want to thank our Chief Legal Officer, Chaman Sidhu, who after 6 years at Xero has decided to leave later this year for an extended career break. Chaman's made a significant contribution to Xero. And I, along with all of us wish her the very best. Damien Coleman will step into Chairman's role in interim while continuing as Company Secretary. I'll now turn to the outlook statement that we provided at our FY '22 results. We are making no update to our outlook today. As a reminder, for FY '23, total operating expenses as a percentage of operating revenue are expected to be at the lower end of the 80% to 85% range. So before I conclude, I do want to acknowledge everyone who plays an important role in our journey, in particular, our Xero people across the world who continue to work hard to deliver for our customers and partners. I also really want to thank David and the Board for their hard work and support, and also you, our shareholders, thank you for your ongoing support. I'll now hand back to David for the formal business of this meeting.

Thanks, Steve, for your presentation. And as Steve said, we're now going to move to the formal business of today's meeting. After this, we'll address any general shareholder questions for the Board or management. For resolution-specific questions, we'll answer those as we move through the resolutions, and then general we will handle at the end. Some company secretary has confirmed that the notice of meeting has been sent to all shareholders and other persons who received it within the notice period. The matters requiring consideration today are outlined in detail in the notice of meeting. The notice will be taken as read. Xero's financial statements for the 2022 financial year, together with the orders report are in the annual report, which is available on our website. All resolutions, 1 through 4, are ordinary resolutions; this means that to pass, they require more than 50% of votes cast by shareholders entitled to vote and voting on the resolution. So I'm just now going to take you through the process again to make sure that you'll all have all the instructions you need. Xero share registry provider, Link Market Services, will conduct the voting by way of poll, and Emma Jones of Link will act as [ returning officer ]. Votes will be counted after the end of the meeting and results published on the ASX and Xero's website. Shareholders or their proxy holder can cast their vote using the electronic voting card received after validating online registration, as I previously mentioned. To validate registration, you'll be asked to enter your security holder reference number, your SRN or your holder identification number or your HIN, plus post code if you're in Australia or country if you're outside Australia. To then cast your vote, click the Edit Card button. If you're intending to vote, you'll be able to finalize and submit votes until 5 minutes after the meeting ends. I'll remind you at the end of the meeting. Concerning proxy, the proxy votes that have been submitted prior to the meeting will be set out on the slides shown for each resolution. For some context, the current number of Xero shares on issue is approximately 150 million shares. Shareholders have appointed the Chair of today's meeting, that's me, as proxy for approximately 108 million shares voting either for, against or with discretion for all resolutions. And as indicated on the proxy form and in the Notice of Meeting, my intention as Chair is to vote all discretionary or undirected proxies held by me in favor of each resolution. Shareholders in terms of questions, can submit written questions via the online portal during the meeting by clicking on the Ask a Question button or by voice using the teleconference facility. To ensure questions reach us in time, I do ask you, please submit them as soon as you can if you haven't already done so. Again, as I said previously, any general shareholder questions submitted during the meeting will be addressed after the formal business is completed. I'll endeavor to address as many of the more frequently raised relevant questions as possible during the course of the meeting. If we do receive multiple questions that are similar, we're trying to amalgamate them into one or choose to answer the broadest question, which will cover off the others. So let's now move to the first resolution, which relates to the authorization of the Board to fix the remuneration of Xero's auditor, Ernst & Young, and if not already submitted, I'd like to invite shareholders to submit any questions regarding this resolution. I'm going to pause for a moment to allow enough time to receive them from you and to check whether any questions have already been received? Are there any questions from telephone participants regarding Resolution 1, operator?

There are no questions from holders participating by telephone. Chair.

Okay. Thank you for that. Now are there any questions from U.K.?

Question submitted, David.

Okay. Well, thank you, operator, and thank you, Kate. We haven't received any questions. So thank you for that. We now turn to Resolution 2 to the election and reelection of directors as the first of these resolutions concern my reelection, and I'm going to hand proceedings over to Mark Cross to manage this bit.

Thanks, David. This resolution concerns the reelection of David Thodey as a Director of Xero. David retires at this meeting and offers himself for reelection. The Board, other than David, recommends David to you as a Xero Director and unanimously supports his reelection. I'll now ask David to say a few words about himself and his role on the Board?

Well, thanks, Mark, and I'm back again. And I do want to begin by thanking you, our shareholders, for this opportunity to seek your support for my reelection as an independent director of Xero. As I've mentioned before, Xero really is an exciting company, and it's dynamic, and I really do feel privileged to be a part of the story, both as a director and as Chair of the Board. I mean during my career, I've had nearly 40 years' experience in business, predominantly in the tech sector and more recently in science and research. And I've had the joy of working across a number of countries, including Australia, New Zealand, where I started my career, and Asia Pacific, Europe and North America. And I've had the privilege to be the CEO of a number of businesses, mainly IBM Australia and New Zealand and, of course, Telstra, the telecommunications company in Australia. My previous Board directorship span quite a broad range, obviously technology, telecommunications, sites and health care industries including Vodafone Group. Then, I was Chair of the Commonwealth Scientific and Industrial Research Organization, CSIRO in Australia, but I stood down from there last year. And I've been Chair of TelstraClear and a number of different industry groups through my career. My current responsibilities include at Xero, I'm chair of the Xero Board as stated. And I sit on the People and Remuneration Committee. I'm also Chair of Tyro in Australia, it's an alternative payments and business banking provider, and I'm also a Non-Executive Director of Ramsay Health Care. They're a global hospital group. And I remain active in Australian public policy, primarily around innovation and job creation. And that's why I really enjoyed Xero. Xero really is a unique and special company as I mentioned. I often feel inspired by its aspiration, and that aspiration to become a truly global company from our New Zealand routes and to be a global leader in this market. I remain excited about the potential for this business to grow by serving small businesses around the world to improve their lives. The small and medium business market really is enormous and remains incredibly underserved. And our cloud-based accounting software creates the significant value to them, our customers. The opportunities for our company remain truly significant and it is our collective objective to ensure Xero continues to be a trusted business wherever we operate. acting ethically and authentically while upholding the high standards of governance that you would require from us. Seeing our business create long-term value for all our stakeholders, including you, our shareholders, is a priority for this Board, and I'm committed to this objective. So Mark, that brings me to the end of my comments, and let me pass back to you. Thank you.

Thank you, David. I'd like to invite shareholders to submit any questions regarding this resolution. I'll pause for a moment to receive your questions. Are there any questions from telephone participants regarding Resolution 2?

There are no questions from holders participating by telephone?

Thank you. I'll now take questions from shareholders who have submitted written questions via the online platform. Kate, have we received any questions on Resolution 2?

Thanks, Mark. We haven't received any questions.

Okay. So we haven't received any questions, and I'll now hand proceedings back to David.

Well, thanks, Mark. So now we can move to our next resolution, which concerns the election of Susan Peterson as a Director of Xero. Susan retires at this meeting and offers herself for reelection. The Board, other than Susan, recommends Susan to you as a Xero Director and unanimously supports her reelection. I'll now ask Susan to say a few words about herself.

Thanks, David. And look, Kia Ora, and good morning. Thank you for the opportunity to present my credentials to the shareholders for consideration for my reelection as an independent director of Xero. I've been a full-time director, adviser and investor for the last 9 years and a director for the Xero past 5.5 years. I'm currently the Chair of Vista Group and a Director of Arvida. I'm a previous Director of ASB Bank and Trustpower and will be retiring from PFI's Board of Directors later this year. I've also been on the board of the not-profit global women for the past 4 years, and I concluded 9 years as a member of the New Zealand Markets Disciplinary Tribunal last year. Look, I really enjoy being part of the Xero team and playing a role in its future direction and a world of constant challenge, change and opportunity, I'm super proud of the way our team at Xero has responded. Everyone at Xero has pulled together as we look after well-being of each other and our customers while never losing sight of our collective commitment to continue to deliver [indiscernible] as our shareholders. And I'd like to take this opportunity to warmly and sincerely thank our team. For me, I have a particular interest in helping companies to drive performance through technology, innovation and organizational culture. I've worked with companies at all stages of their life cycle; startups, small businesses, large multinationals, fast-growing global technology companies and companies that have really faced more testing times and struggled. All of these experiences have been and continue to be relevant at Xero as we steer into ongoing market uncertainty. So what skills and experience do I bring to Xero? I guess now I can say I'm a reasonably experienced listed company director. I'm currently on the board of 4 listed companies and I have a particular experience working alongside companies that are targeting international growth. As I said, I spent 9 years as a member of the New Zealand Market's disciplinary tribunal, and I really understand our obligations to support a healthy and vibrant capital market. I have a wide range of hands on experience in a variety of relevant disciplines, including digital technology, customer service, legal, banking, general commercial risk management more recently conduct culture, and as I mentioned, capital markets. I think possibly, most importantly, I'm instinctively independent, completely afraid to share account perspective and to challenge the status quo on important issues. And finally, I'm really proud as Xero shareholder. And so like everyone here today, I remain very focused on doing everything I can to add value to this company and delivering shareholder value for us all. So in summary, working with the Xero team to continue to realize the opportunities ahead of us, really excites me -- and I would very much appreciate the opportunity to continue to serve on the board and assist our great team and working through both the challenges and the many opportunities that lie ahead as we grow this great company. So thank you very much.

Well, thanks very much, Susan. So now it's time to invite shareholders to submit any questions regarding this resolution. Once again, I'll pause for a moment to receive your questions, and we'll go straight to telephone participants regarding resolution 3. So operator, are there any questions?

There are no questions from holders participating by telephone.

Okay. Well, thank you, operator. Let me now take questions from shareholders who may have submitted written questions by the online platform. So on Resolution 3, Kate, have we got any questions?

Thanks David, there are no questions.

Okay. Well, since we haven't received any questions, can I please encourage you to cast your vote. Okay. Well, now we're on to the last resolution, Resolution 4, and the final resolution concerns the election of Brian McAndrews as a Director of Xero. As I mentioned before, Brian was appointed by the Board as a Director on the second of February in 2022 and now is required to stand for election. The Board, other than Brian, recommends Brian to you as a Xero Director and unanimously supports his election. I'll now ask Brian to say a few words about himself. So Brian?

Thanks, David. It's great to be here in Auckland with the rest of our Board for Xero's 2022 Annual Meeting, and thank you for the opportunity to seek your support for my election as an Independent Director of Xero. Xero is recognized as a leader in cloud accounting, and there's a huge opportunity ahead for this business. So it was a privilege to be invited to join the Board earlier this year in February. As a new Director, I'd like to briefly cover today why I'm here and what I believe I can contribute as a Director of your company. So first up, why did I want to join the Board of Xero? I liked Xero as a purpose-led company committed to helping global small businesses and their advisers benefit from the power of cloud technology. Xero has global ambitions and enormous potential for growth with the majority of small businesses around the world yet to discover the benefits of doing business in the cloud. I've also been very impressed by the caliber of the people at Xero, including my fellow Board of Directors, the leadership team and the other Xero employees. I've had the pleasure of meeting so far. There's a strong shared sense of purpose throughout the organization. What do I believe I can bring to the Xero Board? I've helped drive growth in innovation for leading technology, Software-as-a-Service and cloud-based companies, both as a nonexecutive director and as a CEO. During my executive career, I was CEO of Pandora Media, a streaming service provider in the U.S. and aQuantive, a digital marketing services company and technology company that was acquired by Microsoft. During my 10-plus years as a CEO, I learned a lot about how to create and deliver against strategies designed to fulfill ever-changing customer needs to lead purpose-driven organizations with positive cultures, to oversee international expansion and to effectively and efficiently scale technology businesses during periods of rapid growth. I currently serve as Lead Director on the Board of Frontdoor, Inc., a platform for home services and as a presiding director on the Board of the New York Times. In my career, I've had the privilege of serving on the boards of nearly 20 companies, 10 of which are or were public and ranging from early stage to multibillion multinational companies. I've learned to be an effective Board member, assisting management in formulating strategy, working with CEOs on leadership and management skills, advising on scaling and helping make boards more effective. As part of my responsibilities on the Xero Board, I'm also a member of the Board's Audit and Risk Management Committee. I have the determination and capacity to commit myself to being a high-performing Director of Xero on your behalf. My focus as a director is aligned with yours as owners to see Xero create long-term sustainable value for our shareholders and deliver on our purpose to make life better for people in small business, their advisers and communities around the world. With your support, I look forward to working with my fellow directors and the Xero team as we work towards these goals. Thank you. And now back to you, David.

Well, thank you, Brian. So now it's time to invite shareholders to submit any questions regarding this resolution. Once again, I'll pause for a moment to receive your questions. Now operator, are there any questions on the phone regarding Resolution 4?

There are no questions from holders participating by telephone. Chair.

Thank you, operator. So let me now turn to Kate to see if there's any written shareholder questions that have been submitted through the online? so on resolution 4, Kate, are there any questions?

Thanks, David. We don't have any questions.

Okay. Well, since we haven't received any further questions. Look, I encourage you all to please cast your vote. Resolution 4 is the final resolution. So that concludes the formal business of the meeting. But now we move to a very important part, which is around taking time to address any general questions that you have been asked, will be asked by our shareholders. And so we're, again, going to follow the same practice of me asking if there are any questions from the operator, and then I'll go to Kate in case there's a written question and I'll slide back and forth. So let me just start with operator, are there any questions from the phone?

We do not have any questions from the audio participants, Chair.

Okay. Well, thank you. Kate, are there any written questions?

Thanks, David. We do have a couple of questions. The first question comes from Michael Holland. He asks, can you tell us more about the changes in the rise of open banking? And what is the opportunity for Xero? And how are you positioning the business?

Well, I might throw to Steve to answer some of the specific there, but I have been involved in the open banking standards in Australia. And it is really important to make it easy for customers to move between banks. And therefore, the open banking standards is really out creating an open and transparent platform. So it is really important for us because it creates that open platform base that allows people to move should they want to and get access to information. And so that's very important. So Steve, you probably see it all around the world, it be interesting your comments.

Sure. Well, thanks, David. And it's a really important question. So if you go back to the whole beginnings of Xero, which our founder, Rod envisaged a collaboration between an accountant bookkeeper and a small business operator in real time, looking at the health of the business in real time being able to make decisions that can improve the effectiveness, the operations of that business in real time, there are a number of elements that are key to delivering on that vision that we've been working very hard over many years in different parts of the world, collaborating in particular with banks. And the interesting thing about open banking is that it opens up a much more, let's say, broad and effective way of ensuring the customers of banks can get their data into an accounting platform like Xero, so they can get that real-time data, their real-time information it will form that enables them to make much, much better decisions about their business. So it is really important that more and more banks make that data available. There are different parts of the world that are more advanced. The U.K. most advanced in that regard. Australia and New Zealand; fortunately there, we've got very good connections to banks directly. But again, open banking will just ensure the customers benefit by being able to, as David said, be more flexible in their approach, but most importantly, to have their data available where they want it so that they can make the most effective use of it.

Thanks, Steve. It is a very important change in regulation in the industry. So we are pleased about it. So Kate, back to you, and then we'll go to the operator after that. So...

Thanks, David. We have another question which comes from Susan Robinson. She asks -- regarding MTD for VAT in the U.K. is the slow uptake due to macroeconomic headwinds or competition? And she also asks, what benefits Xero offer to sole traders on Xero Go.

Great. Well, a really good question. And again, I'm going to pass to Steve in a moment because he just spent a good 4 weeks when we hit Xerocon in the U.K. But the Board has been discussing that. Look, the truth is that it's just too early to comment yet. So we're just waiting to see how the macro situation plays out, but we are watching very closely. So Steve, do you want to make any comments from your time in the U.K?

Yes. Look, I think the Making Tax Digital for VAT, just to be clear, is now targeted as business businesses that turn over less than GBP 85,000. We know that there is a significant number, hundreds of thousands of businesses that are yet to comply. There are compliance time lines that are upcoming. And so it is reasonable to expect that, that will accelerate But it is not so much a subject of industry competition, it is more a subject of, in a sense, the focus small business has on compliance at a particularly challenging time, I would say and also the level of encouragement that government is providing as well. So we'd expect those things to evolve as we look forward. Xero Go is really an important development for us. There's -- if you look at it from a self-employed person's viewpoint, and particularly with Making Tax Digital for income tax coming up, having tools that make it really easy for a small business operators who are self-employed, don't have a very complex business, but nevertheless are busily working away doing what they do, easy way for them to invoice track expenses and then feed that through to their accountant in preparation of their income tax return is a real good opportunity for us. It also gives us something for our accounting and bookkeeping partners for all their clients, not just those that are small businesses, significant enough to want a full accounting solution. So this really does, in a sense, fill out the spectrum of small business customer needs. And it's early days. We're excited about the product, but there's more enhancements coming, and we'll learn a lot from the way our customers experienced it and our accounting and bookkeeping partners leverage it over the course of the next few months.

Thanks, Steve, and I can only reinforce that. We do think Xero Go is an exciting product, but it is early days and it's rollout. But it does hit a really good part of the market. Okay. Operator, are there any questions at all from anyone on the phone?

We do not have any questions from the telephone line, Chair.

Okay. Thank you very much. So Kate, any more written ?

David, we do have 1 further question. The question comes from [ Blorine Pedocus ] and they ask, what is Xero doing to capture the growing side hustle businesses, which on the SME scale might fall below the S? Is it going to scaling its products to capture this ever-growing market?

I just want to be clear, Kate, was it under S or above S?

Under S.

Under S. Okay. Again, I'll probably throw it to Steve to specifically answer the question. But look, we want to address as much of the market as we can, but our sweet spot is in the SMB market. And I think that Go probably is going to help us in that Blorine. But Steve, would you like to sort of expand a bit more?

Yes. Look, I think you're right, David. I think it is Xero Go is about the S and as S, as S can be. So it is about anybody who's in the business of operating whatever [indiscernible] Economy work ultimately, any line of business, where you want to capture your expenses conveniently where you want to invoice where you want to have a really good sense in a dynamic way of your income and expenses in other words, your financial position at any point in time, that's really where we're intending Xero Go to fulfill that need. Along with, I would say, the potential for Xero Go and the connection to the accounting and the bookkeeping partners we have, because it's our strong belief that people side of the business is important, and that all small business operators over time will benefit a lot from the advice and support of an adviser who can have a look at the numbers and gives them some food for thought on how they might operate in a more effective way.

Great. Thanks, Steve. I think the short answer is we like all customers, just about or anyone who's got a small or medium business. Okay. Kate, I'll go to you again. Anything -- any other written questions?

Thanks, David. No further questions at this time.

Okay. Great. Operator, any telephone questions?

We do not have any telephone questions, Chair.

Okay. Well, then I think that brings us to the end of the 2022 Xero Annual Meeting. Before I formally close the meeting, a quick reminder that if you are intending to vote on the formal business of the meeting, you should finalize and submit your votes now. Voting will close in 5 minutes' time. As mentioned earlier, the results of the voting will be released on the ASX once the votes have been counted after this meeting, and we'll also post them. But it really just leaves me on behalf of your Board, to thank you, all our shareholders, for attending the meeting today. We really do appreciate your support, and we're looking forward to hopefully seeing you in person possibly next year, we'll wait and see. In the meantime, please keep safe, and I now declare the meeting closed. Thank you very much.