Xero Limited

Thank you for standing by and welcome to the Xero Limited 2026 Interim Results Conference Call. I am joined by Xero's Chief Executive Officer, Sikinder Singh-Cassidy, and Chief Financial Officer, Claire Blamley. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the call over to Sikinder Singh-Cassidy, Chief Executive Officer of Xero. Please go ahead.

Good morning from Sydney, Australia. Thank you for joining our investor briefing today covering Xero's financial and operating results for the half year ending September 30th, 2025. I'm Sikinder Singh-Cassidy and I'm with Claire Bramley, our CFO. Our first agenda item is the summary of Xero's performance for the half year. I'll then pass to Claire to cover our financial results in more detail before I finish with strategic priorities in Xero's outlook. After that, we'll move to Q&A. So moving to a summary of our results on slide five. We're very pleased with our H-1 fiscal 26-year results, which clearly demonstrates our sustained revenue momentum and execution against our strategy. We continue to achieve strong revenue growth across our 3x3 portfolio. This, along with another meaningful increase in profitability, enabled us to again deliver above the rule of 40, demonstrating strong cash generation. I'm going to touch on the key metrics here, and Claire will cover them in detail later in the presentation. Operating revenue grew 20% year-on-year to reach $1,194,000,000, or 18% in constant currency. This strong growth comes despite a tough prior period comparison. Adjusted EBITDA was 351 million or up 12% year-over-year. Finally, our solid operating results and strong cash generation resulted in a Rule of 40 outcome of 44.5%, an increase of 0.6 percentage points year-over-year. I'll now spend a few minutes outlining the regional contributions to revenue growth. We saw each of our largest markets, Australia, the UK, and the US, make a strong contribution. ANZ remains a core component of our portfolio and continues to deliver robust quality growth off a large base. You can see the sustained performance reflected in our results. We delivered 70% revenue growth year over year. This was the result of continued subscriber and ARPU expansion, with subscribers up 7% and ARPU growing 12% year over year. Australia continues to drive strong revenue growth up 19%. subscribers were up 9% year over year. Australia is making good progress in a highly penetrated market, continuing to add new features to support ARPU expansion while delivering solid subscriber growth off an already large base. Its GTM playbook is evolving to progress new customer mix, but as we've said before, moving the back book of existing customers is a longer-term opportunity. New Zealand delivered quality growth in what is our most easily penetrated market. Revenue grew by 8%, with net subscribers up 4% year over year. This is a positive result and ahead of economic growth in this mature market. Overall, the performance of AMZ reflects the strength of our core market relationships and our ability to drive growth through strong execution and a focus on customer value. Turning our focus now to the international segment, which covers the UK, North America, and our rest of world markets, I want to note that this segment is fundamental to our future scale and is executing strongly against our strategic priorities. International revenue grew by 24% year over year. Looking at the individual markets, in the UK, we delivered robust performance with 25% revenue growth. Subscriber growth remained strong at 13%. We saw early indications of tailwinds related to HMRCs, regulatory changes flowing through. We anticipate the majority of the market benefit will come over the next few periods. We are excited, as this will support subscriber growth, but we remind you that there is a negative impact on ARPU as smaller businesses adopt our lower-priced compliance offerings. North America continues its momentum, delivering 21% revenue growth, despite the headwind of no revenue from XeroCon this past. Adjusting for this, growth was 26%, a great result. Subscribers grew 15%, a good outcome in what is typically a seasonally weaker half. I will talk about our Melio acquisition shortly, but keep in mind that the deal immediately provides a step change in the scale of our U.S. business, and we're really excited about its ability to accelerate growth in the U.S. Finally, our rest of world markets grew revenue by 22% with subscriber growth of 11%. In summary, strong execution in the international segment is building a solid foundation for sustainable, high-quality growth in these markets. This slide brings the key financial outcomes together, showing how we are successfully balancing growth and profitability while delivering above-limit 40 outcomes. We're consistently delivering EBITDA and free cash flow growth, which is contributing to strong cash flow generation. The free cash flow margin reached 26.9%, which you can see on the metal chart. Adding this to revenue growth, where we used the 18% constant currency metric, resulted in our Rule of 40 outcomes increasing another percentage point to reach 45%. We are very pleased with this result, which demonstrates our ability to deliver sustained revenue growth supported by disciplined investment to grow profitability, while at the same time adding value for our customers. Before I hand to Claire, I want to briefly acknowledge the completion of the Emilio acquisition in October. We're incredibly excited to bring our two businesses together, and I'll discuss this in more detail later in the presentation. Now I'll hand over to Claire to walk us through the financial results.

Thank you, Sikinda, and good morning, everyone. It's a pleasure to be here to present our financial results for the first half of fiscal 26. We have delivered another strong half. As Sikinda said, Our results show sustained revenue momentum across our portfolio of businesses and the effective execution of our strategy, allowing us to deliver another above-rule-of-40 outcome of 44.5%. Starting with revenue, we have a large recurring revenue base spread across a global portfolio, which enables us to consistently deliver strong top-line growth. Despite the tougher criteria comparisons, we maintained strong revenue growth this half of 20% year-over-year. Subscriber growth was 10%, to reach just shy of 4.6 million subscribers at the end of the period. RFU growth was 15% on a reported basis, noting that our RFU disclosures are based on the end-of-period foreign exchange rates. On a constant currency basis, RFU growth was 8%. The continued balance growth in both subscribers and ARPU drives our AMLR, which I'll talk about on the next slide. AMLR reached $2.7 billion. This represents a 26% year-over-year growth, or 19% in constant currency. AMLR, like ARPU, is calculated using end-of-period foreign exchange rates. The AMLR exit rate sets a strong foundation for growth. The short-term discounts and hedging are excluded from this number and will impact how this translates into full-year 26 revenue. We saw both impact our revenue growth in the first half relative to AMLR growth. We are continuing to deliver very healthy gross profit, with gross profit margins at 88.5%. The slight reduction year over year reflects our continued investment in our customer experience. Now let's look more closely at the drivers of our 10% RP growth in the first half, which you can see on slide 12. Price changes reflect monetization of the significant value we have added to zero through new features and capability improvements. Price increases typically happen in the first half of the year throughout Australia, New Zealand and UK regions. So we expect pricing to contribute more significantly to our food during this period. The specific price changes across our plans reflect a more strategic and segmented approach. This is evidenced by our decision to hold prices flat on all lower end Ignite plans in each of these markets. Moving to product mix. We are seeing positive results from our grow to market strategy. with new customer mix incrementally improving in the UK and US as our targeted sales motions become embedded. In Australia, there have been some headwinds as we added payroll back into our lower-tier plans. This has seen some customer shifts towards these plans. While overall we have made progress on our new customer mix, as Vikinda mentioned, back-book progress remains an opportunity in the longer term. Across all regions, we are continuing to evolve our direct go-to-market channel to support our focus on mix. We are successfully targeting higher-value customers through applying short-term promotional discounts and deepening our lead generation through avenues such as partnership and affiliate marketing. Finally, platform revenue growth continued to drive ARCU expansion, largely due to strong payments progress. So let's turn to that. It is worth reminding you the payments contribution in the first half was entirely from our existing accounts receivable offering, as the Melio acquisition did not complete until October. We continue to see excellent momentum, with payments revenue growing 40% year on year, mainly from continued strong TPV growth of 35%. This revenue has been generated across our 3x3 and reinforces our confidence in the value of providing integrated payments and accounting to SMBs. Employees paid through zero payroll increase 5% year-on-year. This lower growth rate reflects the deep penetration and large existing customer base we have in Australia. We are looking forward to the opportunity to start driving payroll penetration in new, untapped markets, such as in the US. where our embedded offering with Gusto goes live in December. Now let's look at customer retention. MRR churn was 1.09%. This remains below our long-term pre-pandemic average of 1.15%. The slight increase from the last half in part reflects our decision to incrementally allocate investment to the direct channel, as well as target growth in our international segment. As we've noted before, while these segments have structurally higher churn, they also typically attract higher R2 customers, which aligns with our strategy to optimize the total value of each subscriber. Our focus on the value of a subscriber is shown in our LTV, which expanded to $19.56 billion, with LTV per subscriber increasing to $4,261. With regards to your acquisition metrics, customer acquisition costs per gross ad was $757, with a healthy and efficient payback of 15.2 months. The increase in CAC aligned with our strategic focus on attracting higher value subscribers to drive mix, rather than just focusing on volume. We are investing in data-driven tools and building our internal capabilities across digital performance marketing to drive our direct channel. We are also continuing to leverage our partner-facing teams to better support our accounting and bookkeeping customers. This resulted in an LTV to CAC ratio of 5.6, slightly down from the prior period, driven mainly by the AMZ region, which remains at an industry-leading ratio of 10.7. Let's move to operating expenses. The OPEX ratio excluding acquisition costs was 72.8% in the half. We have revised our fiscal 26 outlook and now expect the full year ratio to be around 70.5%. Within this, we've added media, adjusted for currency, and importantly realized some efficiency benefits while continuing to fund investments for growth. Our capital allocation framework remains disciplined and returns-based, which in turn aims to deliver improvements in efficiency. As you can see through our revenue per FTE, which increased 16% year-on-year. As we realize this efficiency, we are able to decide the proportions that we reinvest in line with opportunities we see and our rule of X approach. Now let's turn to the key investment areas for the half. Sales and marketing costs were 31.7% of revenue, a reduction of 0.3 percentage points year-on-year. This reflects disciplined investment in digital performance marketing as we continue to strengthen our internal capabilities. Product design and development costs grew 18% year-on-year, equal to 28.2% of revenues. Gross product spend, which includes capitalized costs, grew 24%, equal to 34.6% of revenue. This reflects our continued focus on product velocity, including hiring domain experts to support our new AI capabilities. Our capitalization rate was higher at 47.4%. This was driven by more developer time being spent on releasing new products and features. many of which we announced at Zero Con Brisbane. General and administration costs were 12.9% of revenue, an increase of 2.4 percentage points. As we flagged at our fiscal 25 results, this increase was expected and is primarily due to higher executive personnel costs associated with the accounting treatment of option and sign-on equity grants announced last year. The majority of these non-cash costs are not expected to recur in fiscal 2017. Moving down to the bottom line, our sustained revenue growth and disciplined capital allocation delivered an adjusted EBITDA of $351 million for the half, a 12% increase year-on-year. Our adjusted EBITDA margin was 29.4% down 2 percentage points. driven by the non-recurring G&A expenses and investment in sales and marketing previously mentioned. Adjusted EBITDA excluding total share-based payments improved by 0.8 percentage points to 38.8%, demonstrating the continued positive operating leverage in the business. Our profitability and discipline translated into strong, free cash flow. We generated $321 million of free cash flow in the half. This represents a free cash flow margin of 26.9%, a significant step up from 21% in H1 of fiscal 25. The high-quality recurring nature of our business continues to deliver very strong cash realization from customers. Our payments to suppliers and employees grew only by 10%. This lower cash outflow relative to OPEX growth was partly due to the timing of some vendor payments, as well as the higher proportion of non-cash share-based payments. We saw a $25 million increase in net interest received, reflecting the higher cash balances held prior to completion of the media acquisition. This benefit is temporary, as we have now completed the transaction. Finally, there was a limited impact on tax payments in H1. as we depleted prior year tax repayments. We will enter a more normal New Zealand corporate tax payment rhythm in the coming periods, which will impact future cash tax payments. It's worth keeping these factors in mind as we head into the second half. A strong cash generation further strengthens the balance sheet. We ended the half with a net cash position of $3.2 billion, supported by the net funds raised for the NEO acquisitions. Following the completion of the media acquisition, our pro forma balance sheet shows a net debt position of approximately $0.5 billion, with a pro forma net debt to EBITDA of approximately 0.9 times. This reflects our commitment to maintaining a strong balance sheet, while also creating a clear pathway for meaningful deleveraging. It also ensures we retain flexibility to continue pursuing our build, partner, and buy approach to capabilities. It is important to note that the shift to a net debt position will increase interest costs and reduce interest received in the second half of fiscal 26. This change in our balance sheet position will create a headwind through our rule of 40 performance in the second half of the fiscal year compared to the first half. With regard to the completion of the Melio acquisition, slide 21 outlines the consolidated go-forward business showing Melio included on a pro forma basis for the first half of fiscal 26 compared to the same period last year. The disclosure here is intended to help with the understanding of the combined business on a life-for-life basis. We won't be providing separate performance metrics for Melio going forward. Its revenue contribution will form part of the new US region, of which you can find more details in the appendix. In the first half of fiscal 26, underlying Melio revenue growth reached 68%, driven by the addition of around 7,000 new customers since the second half of fiscal 25, and by an increased usage per customer. Together, these delivered an 18% lift in underlying TPV. This strong growth will support the scaling of our U.S. business, as shown in pro forma revenue growth of 53% year-over-year. Turning to profitability, pro forma EBITDA reflects Melio's current scale and maturity. I'll walk through a few of the key drivers of this result and why we remain confident in the scale opportunity and the returns it can generate over time. Melio's growth margin has been broadly consistent with fiscal 25. That's mainly due to the timing of product-led syndication additions. We are clear on the drivers to expand margin going forward through leveraging scale, syndication, payment mix, and subscription growth. Operating expense growth reflected a planned investment in sales and marketing to support this growth opportunity. We expect to see scale benefits come through as Rio continues its rapid growth. There are also two future considerations not included in the pro forma that I want to call out. First, it doesn't reflect the shift to a net debt position or the non-cash amortization of acquired intangibles we highlighted at completion. Second, the accounting treatment of MEDEO's management earn-out and incentive plans will add about $10 million in operating expenses in the second half of fiscal 26, which isn't reflected here. The pro forma Rule of 40 came in at 39.8%, a really solid outcome. While it does face some headwind from the shift to net debt, we remain very confident in our ability to deliver against fiscal 28 Rule of 40 and revenue growth aspirations. To close, the first half has been another strong period of execution for Xero. We're delivering high-quality revenue growth, strong cash generation, and remain well-positioned to keep investing with a disciplined rule of X framework to capture the significant opportunity ahead. Thank you for your time. I'll now hand back to Sikinder.

Thanks, Claire. I'll now talk to our FY25-27 strategy and update you on a few recent moves we've made. As you know, our vision and purpose are constant at Xero. Successfully delivering against these is key to achieving our aspiration, which I'll cover in a few moments. Our Winning on Purpose strategy, which you saw us lay out on Investor Day in February 2024, has four key pillars. Win the 3x3. Build a winning GTM playbook for Xero's next chapter. Win the future, which is about focused bets and innovation. And lastly, unleash zero and zeros to win. These four pillars are underpinned by our discipline capital allocation framework for investment. This tightly aligns with our strategy, our rule of 40 aspirations, and our build, partner, or buy approach to pursue organic or inorganic opportunities. We're making great progress executing against our strategy with focus and purpose to deliver tangible value for our customers. We've made a number of moves in the last six months, which we highlight on slide 24. There are three key moves here that I want to spend some time on. Firstly, we continue our strong product delivery momentum through working hard to build product ourselves, but also through partnerships and our acquisition of Nelio, which I'll discuss shortly. We've made significant progress this half in delivering important product features to help customers across our three largest markets, Australia, the UK, and the US, to complete their three most important jobs to be done, accounting, payroll, and payments. A few of the key product highlights rolling out are analytics powered by SIFT across US, UK, and Australia, as well as launching our new customer homepage, currently in beta, to give customers an insight-rich view of their business performance. In addition, we're announcing today the beta launch of our embedded payroll solution through our partnership with Gusto to provide US payroll capabilities. Secondly, we've implemented a series of changes to strengthen our go-to-market playbook. Our core focus has been increasing the sophistication of our sales motions to improve As Claire noted, we've made encouraging progress on this, especially in the front book, and we're intensifying our efforts on the back book for existing customers. Thirdly, we're allocating capital for long-term as we look to win the future through strategic investments in AI and mobile. We're really excited about the next evolution of JAX, our AI financial superagent. I'll spend some more time on this in the next few slides, but I'll call out one key highlight, which is our decision to partner with OpenAI, to bring search capabilities for financial information inside the Xero product. We also continue to improve the mobile onboarding process and make mobile payments easier by rolling out tap-to-pay and adding mobile bill upload and simple invoice template setup. And we're also enabling our people to move faster for customers and do the best work of their lives so we can unleash Xero and Xero to win. We're empowering all Xeros with AI education and tools to automate repetitive tasks increase internal efficiencies, and drive better value for our customers. We now have over 70% of engineers using AI in their daily workload, and nearly 50% of customer support responses are drafted by AI. Alongside this, we're continuing to invest in our purpose and performance-based culture with improved employee development opportunities for all zeros. So you can see our investment is disciplined and aligned to our strategy. Coming back to our investment in AI, on the next slide, I'll talk to this in a little more detail. as a leading global SaaS business that has long been powered by machine learning and traditional AI, Xero continues to see AI, and generative AI specifically, as a significant opportunity to innovate and invest, all with the goal of unlocking significant value for our customers. At XeroCon Brisbane in September, we were thrilled to announce the evolution of our AI financial super agent, JAS, JAS SaaS Xero. JAS is built on Xero's AI-agented platform, which orchestrates multiple specialized sub-agents across Xero. Our vision is simple, to reimagine financial management using AI to help small businesses and their advisors work smarter together. This vision is supported by four unique pillars. The first is reimagined experiences. We're leveraging AI to reimagine the Xero experience. The goal is to have Jack help our customers interact with Xero seamlessly. We're leveraging AI to reimagine the Xero experience. The goal is to have Jack help our customers interact with Xero seamlessly. We're leveraging AI to reimagine the Xero experience. The goal is to have Jack help our customers interact with Xero seamlessly. business with information from connected apps. This also allows them to explore their data and dig deeper into their finances. Jax also brings them answers from beyond their business, incorporating real-time external data from across the web on topics like market trends, thanks to our collaboration with OpenAI. The fourth and perhaps most important pillar is to be a trusted partner. Jax is built on a foundation of security, privacy, and decades of accounting expertise. offering a trusted partnership to our customers. Its accuracy and superior AI relies solely on large language models. This ensures greater reliability and confidence in the output. So to summarize, we told you at our last result we have an ambitious AI agenda in FY26, and you can see we're pursuing this and adding customer value at pace. We have strong confidence in the value of this technology. Our key focus for now is helping customers engage and realize that value. This will further inform our approach to monetization. I'm excited to dive into the next steps for integrating Nelio, but first let's quickly recap the powerful rationale behind this acquisition. It's what fuels our confidence in the significant value creation opportunity ahead. First, there's a critical customer need on a large and growing market. SMBs and their ABs want their accounting and payments together. It creates efficiencies, improves their cash flow, and importantly, saves them time. and this is reflected in the significant TAM for U.S. F&B payments. Secondly, the combination is a powerful strategic fit for Xero. Acquiring Melio aligns with our 3x3 strategy and gives us a step, function, change in our U.S. product proposition, scale, and monetization opportunity. Third, this is a... Many of you have already met Matan. The quality he and his team bring to Xero is significant, and this has demonstrated in the exceptional growth and strength of the Melio offerings. Fourth and most importantly, together, Xero and Melio is a compelling value creation story. These are two complementary platforms that can drive significant scale together. Melio's growth trajectory in U.S. penetration uplifts our scale in the U.S. business from day one, with much improved unit economics and a larger and stickier ARPU. As this business continues to scale at pace and is powered by Xero's growth engine, we have strong confidence in meeting our aspirations and capturing the very attractive value creation opportunity. and we are moving quickly to accelerate growth and capture this value. We are very pleased to announce our first key integration milestone, the launch of Melio Bill Pay inside of Xero, which is now scheduled for December 2025. This will immediately enrich our U.S. offering, providing small businesses the seamless and powerful bill payment solution directly within the Xero platform. It will give Xero customers access to Melio's payment functionality, help them save time and optimize cash flow, including multiple ways to pay and visibility on payment times. Our ability to move at pace on this integration is a testament to Melio's platform and the efforts of both the Xero and Melio teams to drive towards realizing the value of the acquisition. In addition to this, we're moving quickly to leverage Xero's GTM capability and reach to drive Melio's standalone growth and cross-sell opportunity to Xero.com. I'd now like to move to our FY26 outlook. As Claire said, we have lowered our OpEx guidance and now expect total operating expenses as a percentage of revenue to be around 70.5 in FY26. As we have previously explained, there are some non-recurring elements in this, and we expect the ratio to be lower in H2 than H1. This ratio now includes VLEO, but excludes the impact of transaction costs. Incorporating Melio provided a small benefit, with other drivers including improved efficiencies contributing the majority of the reduction. Of course, in addition to this, we continue to pursue our aspirations, which we updated when we announced the Melio acquisition. We expect the combined business to significantly accelerate U.S. revenue growth and give us the opportunity to more than double Xero's FY25 group revenue base in FY28, and this is before synergies. And we continue to anchor on our Rule of 40 aspirations and deliver a balance of both growth and profitability at the group level. This revenue growth outcome is anticipated to support the achievement of greater than Rule of 40 outcomes for the group in FY28, with a dilutive impact in the interim as we continue to invest in Melio and the business scales. Our aspirations are strong and they are credible, and we're really excited about achieving these. I'd now like to wrap up. There are three key themes from today's presentation. sustained strong revenue growth across our 3x3 portfolio, continuing to deliver a greater than little 40 outcome with strong cash generation, and the successful execution of our strategy, securing key wins across our three core priorities. This momentum is consistently enhancing the value we deliver to our customers as we continue our journey to become a world-class SaaS leader. Before I conclude, I would like to acknowledge our teams around the world, And I really want to thank them again for their hard work as we continue to do all we can to support our customers and partners. That concludes our presentation. I'll now pass over to the moderator for your questions.

Thank you. We will now have a question and answer session. Just a reminder, if you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. The first question today comes from Eric Choi from Baron Joey. Please go ahead.

Hey, good morning, Sakindar and Claire. Could I just do two, sorry, this one's a bit of a long-winded one, but just the share price is down today, and I think it's because there's an implied accounting EBIT, accounting EBIT downgrade versus consensus. I just wanted to check whether it's actually an operational EBITDA hit and actually maybe an even top-line upgrade. And so if you just bear with me on the logic, like if I look at your revenues, and Graham up the base business. It actually implies second half revenue growth is accelerating versus the first half, which consensus didn't have. And then Melio grew 68% on an underlying basis. And so market growth for Melio was below this as well. So revenues are clearly ahead. And then on cost, if we just take accounting DNA out of it for a second, you've actually lowered your core cost to sales which offsets growth from the kind of Melio gross margins holding flat. So at that EBITDA level, it actually doesn't need to move much. But then at this accounting EBIT level, which incorporates DNA, like sell-side including myself, we're kind of bad at modelling amortisation and purchase price amortisation and all these other things. So just that DNA ends up being high and therefore you've got an accounting EBIT miss. So I guess the overall question is, operationally it's actually doing in line to better, but you've just got this accounting ebit miss. Is that right?

Hey, Eric, this is Claire. So, yeah, thanks for your question and laying that all out. I think the first thing I would say is, you know, we're really pleased with the strong execution that we've seen in H1. And to your point, really strong top-line growth coming from the zero standalone business and then a lot of momentum as we move into the second half. So you're absolutely right, you can use that AMRR as a kind of foundation for that momentum that we see as we exit the first half. And then that really strong Melio growth that we reported, put those together for the second half. We're really excited about the growth opportunity, not just the second half, but also in the medium to longer term. So I think that's really important to note and gives us a lot of opportunity. From a cost standpoint, yes, I'll just double click into, the reduction in the OpEx ratio guidance that I gave. I just want to know, we have included Melio into that, but Melio does have a very limited impact. And also from a CapEx standpoint, we were anticipating in H1 that the CapEx rate would be higher. That is always aligned when we do like a zero con event. We've published, as Sikinder suggested in her prepared remarks, we've been publishing a lot of new product features and great product velocity. So that was factored into our overall original outlook for OPEX. So as you think about that reduction, it's actually coming – little is coming from Melio. None of that improvement is coming from capitalization, and it's actually coming from other areas, key factors being operational efficiencies but also revenue. So this should be a strong – from an overall EBITDA and stands to your point in terms of rolling through that DNA. But I think it is really important that we are anticipating those capitalization rates to reduce in H2 and so that this improvement that we're seeing is really coming from underlying operational efficiencies, some currency and a very limited impact from Milio.

Thanks, Claire. Can I just do a quick follow-up? And I realize you never go into exact numbers, but just to kind of say future variance, just a rough framework for how we should all think about FY27. I guess if you use your cost to sales guidance for FY26, it's pretty easy to get to an EBIT number. And if you add some DNA back, you're kind of in the 740 to 750 EBITDA range for FY26. And then you've told us, you know, that 45 million comp impact falls out next year. And then obviously you've got you get operating leverage on any revenue growth that you deliver as well. I mean, it seems like a fairly obvious question, but FY27 EBITDA would still have to be in the 800s. Just high level, have I missed anything there?

No, I think as you think about the EBITDA, clearly, as you said, I'm not going to be giving an outlook statement for fiscal 27. But I think what I would do is kind of double down on the fact that we are continuously focused on that overall acceleration of revenue growth and remaining high revenue growth. And we see a huge opportunity with Melio. If you add that into the fact that we are continually focused on efficiency, you've seen great, I think, historical track record in the last couple of years of Xero reducing its overall OPEX ratio. And then I've done that again, adjustment today with lower OPEX ratio. And I think the advantage of that is that we're investing, we continue to invest in critical growth, but also doing it in a very efficient way. And I think if you think about scale, you think about the excellent gross margin, I mean, we're above 88% on zero underlying gross margin, and you think about that OPEX efficiency ratio moving forward, a lot of good indications in terms of the opportunity ahead.

Thanks, Claire. Sorry to be so granular today, but appreciate it. Thank you.

Absolutely. Thanks, Eric.

Thank you. The next question comes from Bob Chen from J.P. Morgan. Please go ahead.

Hey, morning, guys. Just a quick one on the churn, obviously, sort of ticked up a bit. And I think your comments earlier is that has been driven by that focus on business addition. I mean, when we think about subscriber growth from here, because of that shift towards focusing on business addition and you get that sort of high churn, should we naturally expect your incremental subs growth from here just to be a little bit lower but with better output outcomes?

Thanks for the question, Bob. It's to Kendra. So a couple of things. First of all, I think that, as we've noted, churn is still below historic pre-pandemic levels, and we feel good about kind of where churn sits overall. I think a couple of factors are obviously driving that that are ones to think about. While we don't break out the difference between the direct channel and the partner channel, we have said that direct is really performing, and the nature of that channel is that it does have higher churn. Performance marketing will bring more to the top of the funnel, And more will churn out in that, you know, historically our partner channel has lower churn and direct as we allocate to it has higher ARPU, higher lifetime value, but also churn. So there's a mathematical reality. So that's the way I would think about it. I also just think we continue to feel very good about our overall balance on quality of subscribers and quantity of subscribers. If you note, that is a very explicit shift. that we made in the strategy on Investor Day, you know, it was coupled with our long idle removal. And it really speaks to, like, we're always going to be keeping an eye on the quality of the sub and obviously continue to want to, you know, build share and look at overall absolute subscriber numbers. So I'd say we feel very good about the overall trend where churn level sits and recognizing that the direct channel will drive both a higher LTV customer but also higher churn mathematically.

Great. And just a quick follow-up to that. We've obviously seen ARPU increase significantly over the last few years. Has that also played into that sort of churn number as well?

In what regard? I mean, I think the business edition is, again, driven disproportionately by our direct channel, and that already has a higher ARPU. So, again, I'd say it's a mathematical outcome more than anything else. But I think when we talk about churn, it's not really about ARPU. It's about having a big performance funnel where you're, you know, inviting a lot of prospects into the process, you know, and then you will see an increase when you do that, have that do it, you know, paid motion for direct customers. You tend to see higher churn in the first 90 days, as an example. As more people have said, looky-loos is not quite the right example, but they're really just trying the product. You know, like I said, I think it's more a function of that than ARPU specifically.

Great. Thanks again, Ellen. Thank you. The next question comes from Gary Shariff from Royal Bank of Canada. Please go ahead.

Hi, Fikinder and Claire. Just focusing on North America, the revenue missed market estimates and it sounds like it's mainly Canada being weak and also cycling zero con revenues. I mean, is there anything else we're missing there in North America? I mean, was discounting higher than usual or is it just pretty much all zero con revenue that you're cycling?

Sure. I think there are three things. First of all, you were right. If you back out zero-con, the underlying growth you feel very good about, and then if you back out Canada, you get to something north of 33%, about 33% growth in the U.S. And so I think it's a function of zero-con. Canada remains subdued. I think we continue to say that. Now, you will have seen in this And in the last 30 days, there's been an announcement that open banking may finally be coming to Canada. We await that as a good positive, maybe a momentum driver in the market. But, you know, to date, I'd say the move to cloud has been really suffering from lack of open banking. And the third piece is, remember, H-1 is seasonally a weaker half for the business, for the North American business, given when taxes get filed. So I would note that we feel particularly good, given it's a weaker seasonal half. And when you look at that U.S. growth, it's, as I said, at back out zero con, U.S. alone is above 30%.

Got it. Okay. And just a final one on Melio. Just wanted to clarify the numbers that you've reported. Does that include the Intuit subs that are to be exited? I just wanted to try and understand whether that was the case. And if so, or if they're still in there, can you maybe just remind us how many need to be exited and when that's expected? Because I'm just trying to get a, an organic life-to-life growth for Emilio. Maybe you've already reported. I'm just not clear myself.

Yeah, no worries, Gary. So, yeah, I would point you to the disclosures in our investor relations. We have given it to you on an underlying basis. So as you look at that kind of – the new pro forma numbers we've given for H1 of 26, you can see that on an underlying basis that is increasing. So we have adjusted for – for that kind of syndication partner exiting. And I think even on that underlying basis, you can see some really strong growth, both year over year and half over half, both in the number of customers, in the TPV per customers, in the take rate. And I think we also mentioned that underlying revenue growth of 68% is clearly really, really strong.

Great. Thank you very much.

Thank you. The next question comes from Kane Hannon from Goldman Sachs. Please go ahead.

Morning, guys. One simple one. Just the comment in there around the combined business significantly accelerating U.S. revenue growth. Is that relative to the 49% pro forma number that you've done or the more the 33% standalone U.S. growth that you didn't ask?

Yeah, I think if you look at the additional disclosures, because you now see U.S. broken out separately, and you see that kind of in our appendix slides, you can see that the Emilio growth in the first half is more than double our 6-0 growth. And from a scale and volume standpoint, it's actually four times. So, yeah, that kind of more than double. You can see that just as we've disclosed those performer numbers in H1.

And all of our announcements came to make a finer point on it. When we said significantly accelerate, remember, we were comparing to zero standalone at the point of announcement, right?

Yep, that's helpful. And then just the comments on the GP margin sort of being flat, but calling out the driver's expansion being firmly in place. I mean, does that mean we should be thinking about margin expansion in the second half? Also, what are we waiting for, looking for, for that GP margin to start to tick up if the drivers are in place?

Yeah, I think there's multiple things to think about when you think about gross margin for media. You've got the benefit of scale and the additional margin dollars that come through. And clearly, you know, when you've got a growth rate of 68%, you know, there's a big opportunity there. And then there is the areas with regards to the margin expansion. We are anticipating in the kind of short term there to be a little bit of noise on the rate. But what we're pointing to is that we really do see those opportunities to expand both from a volume scale standpoint and a margin expansion over the medium to longer term, which gives us that confidence in hitting, you know, the aspirations that we laid out and getting above the rule of 40 on a combined business in fiscal 28.

Yeah, one other thing, Kane, I think to close point, remember that there is margin take rates, and we talked about in this half, Melio having higher take rate products. improve, like, mixed type of payments. So obviously payment mix on Melio.com is driver. Let's also remember, though, that a lot of GP driver is syndication. And syndication, this is where it says there'll be noise. When partners come online, your syndication line also has a gross profit, an attractive gross profit. So part of it is what you do on Melio.com. Part of it is the puts and takes of partners deploying. And remember, like, Melio does not entirely control when partners deploy. This is why we have a lot of confidence over the, you know, the medium term and the guidance, not the guidance, the aspiration that we gave for 28. But I would remind you that partner syndication timing is not entirely mirrorless control. So this could create noise within a quarter or a half, certainly. Perfect.

Thanks, guys. Thank you. The next question comes from Roger Samuel from Jefferies. Please go ahead.

Oh, hi, morning. I've got two questions. First one, just on ANZ, I understand that you want to invest more into the direct channel, but the LTV to CAC ratio is coming down. I mean, 10.7 times is still a very good number, but it's coming off 14. And do you think that it's becoming harder to attract new subscribers into the base? And, yeah, where do you expect the LTV to CAC ratio to land?

Sure. Well, first of all, I think, Roger, you hit the key point. 10.7 is still a very attractive number. And I think it's fair to say when you're in a market that's very saturated where you have high brand awareness, on a marginal basis, the next customer may be more expensive than the last one. On an absolute basis, it's still attractive to go get them. And that's exactly what you see in our numbers. So we always need to make a call. I'm like, look, on a marginal basis, would we rather pay this for the next customer or not get it? And our choice continues to be we're going to be very mathematical, and if there's another subscriber to go get on an absolute basis, we're going to go after it, and we continue to see that opportunity. Now, over time, I'm not going to give you an LTV number today, but as you know, we've also been clear that over time we see the opportunity to further penetrate this market with more mix, We also see the opportunity to drive more attach of payments and other products. We just announced BGL and work papers. So we're going to continue to also drive, you know, I'd say more penetration of different products for ABs and SBs through this business that over time we hope continues to accrete to LTV.

Okay. And maybe a follow-up question on Emilio. So if I back out. looks like Melio incurred losses of about $56 million in the first half 26 on a performer basis. That's lower than minus 60 in the PCP. So I suppose the question is, when do you expect Melio to be breakeven? I mean, if you look at the guidance, which is the original rule 40, you're pretty close to rule 40 already. as a combined business, plus or minus the adjustments to interest, expense, and the earn-out. So, yeah, just wondering when you can expect Amelia to – the Amelia business to be breakeven.

Yeah, I'll take that. So, first of all, to your point, we did have a great combined rule of four result in the first half, but as I mentioned in my prepared remarks, there are some – future impacts that will negatively impact that as we move forward. However, I think all of these numbers just give us that confidence in the profit opportunity that we see ahead in the Xero and Melio combined business. I think we're not going to give an exact date in the sense of when does Melio become profitable. I think we're a month into owning them. We are extremely happy with the performance that they had in H1, the integration of the business into Xero, whether it's the getting that go-to-market, those go-to-market opportunities running, whether it's the product announcements and the media on Xero coming out in December. There's so much progress being made, which just gives us that extra confidence to deliver on those aspirations. And I think I'd come back to the fact that, you know, we are very optimistic about the opportunity from a profitability standpoint that we get from both the scale, but also that margin expansion, but it's over time.

Okay, great. Thank you.

Thank you.

Thank you. The next question comes from Rohan Sundaram from MS Team Financial. Please go ahead.

Thank you. Hi. Just the one from me on the operating environment. How are you seeing the state of demand from SMBs at the moment, and how would you compare it to six months ago, and whether there's been any changes or improvement?

Thanks. Thank you for the question. First of all, you know, I'd say we see continued good demand, strong demand for the Xero product, and I think when we look out to indicators like XSBI, which, as you know, is our data set, we just published Australia and New Zealand results, as well as And what we saw in both markets, as well as the U.K., is Australia showing nice signs of recovery. New Zealand showing some signs of recovery. U.K. holding steady. And then in the U.S., we haven't published our next generation of XHDI yet, but we look to the NFIB Optimism Index, which stays at sort of all-time highs, despite, I would say, that Optimism Index also showing a lot of uncertainty. Okay. So from what we can tell on the macro, you know, there is some signs that Australian and New Zealand sentiment is getting better among SDs when we look at their real-time sales data in XSDI. U.S. optimism remains strong despite uncertainty and, as I said, U.K. holding steady.

Thanks, Christina. Thank you. The next question comes from Nick Basile from CLSA. Please go ahead.

Morning, team. Just the first question on Melia. I just want to clarify, I think one of the points that Kim did made around integration. Can you talk to, I guess, what your expectations were on that? I think you mentioned bill pay was coming in December. Was that 2025 or next year? And then just in general, how are you thinking about Melia's performance in recent months relative to your longer-term targets to double revenue? I guess just one confirmation that you... you feel that the business is on track to help support that goal?

Sure. Well, first of all, we feel very good about the integration. As you can imagine, I'd say the integration of Melio bill pay into Xero actually gives us more functionality than we currently have with the partner that we're exiting. And it was done faster than anticipated. So I would say we feel really good about the integration. And I think that's a testament actually to Melio's platform. It is very easily integratable. and obviously our teams started planning, you know, for this this summer. So I think that we're really happy to get out a richer product functionality in both workflows and bill pay into the Xero product this soon. So that's December of this year, less than 30 days away. Number two, I think when we look at Melio, what we've said is Melio performs in H1 in line with our expectations, and so we're really pleased about that.

Yeah, I think I'll just double down on our confidence in meeting those longer-term aspirations. I think the performance that we've seen in the first half and the momentum that we've got going in the second half and beyond just gives us even more confidence in being able to be more than double our fiscal 25 revenue in fiscal 28, excluding synergies, and back above the rule of 40 by fiscal 28.

Yeah, no, that's very clear. I think from my perspective, December 2025 sounds like you're ahead of schedule. That's why I got that clarification. Yes, you're right. On operating leverage in the core business, kind of if you think about it, whilst we still can, excluding Melio, the guidance feels like The ability to provide lower OPEX for sales, as you've called out, is being driven by some degree of operating leverage or cost efficiencies in the core business. Can you just help unpack that in a little bit more detail, and again, as that 26 guidance kind of relates to the 28 sort of three-year glide path to maintaining rule authority whilst you're embedding Muleo, which is currently loss-making?

Yeah, absolutely. So that 70.5 new OPEX ratio is incorporating Melio. I'll just remind people that Melio does have a slightly different P&L to our zero core business in the sense of the margin and the OPEX ratios are slightly different. So there's a slight benefit, but it is limited from incorporating Melio into that 70.5%. The key factor I would highlight of that reduction is those operational efficiencies. And it was good to be able to drop those benefits through to the bottom line. And I think something that we're really focused on here at Xero, and you've seen it in our historical trends, is continuing to drive operational efficiencies at the same time as reinvesting back into growth. And I think you can see that in our H1 results and the momentum as we go into H2. strong revenue performance, strong operational efficiencies at the same time as continued investment. And that's a philosophy. Now we're executing against that and we'll continue to focus on that as we move forward.

And sorry to make you clarify, but just when we're talking about operational efficiencies, should we be thinking more about product development side, sales and marketing, or a sort of equal mix of both, or G&A? What sort of buckets are we seeing that benefit from?

Sure. So I think there are two things, Assistant Kinder, driving operational efficiency. First of all, I think while it will show through in all those ratios, number one, I'd say headcount discipline, speaking frankly, like just, you know, being clear on the allocation of capital when we sort of when we think about fixed costs, our fixed cost base, we want to be clear that like when we add to our fixed cost base that we believe it's adding in places that drive revenue leverage, right? So if we're going to add FTEs to product. We want to know that there's a clear line of return to building products that will, you know, that customers will value. So I'd say it's about being very kind of I'd say while we are, you know, we'll continue to grow our cost base, it's the allocation of our fixed cost dollars to the things that drive real value for customers. That is like a very clear way that we think about, you know, driving increases in our cost base. Number two is, you know, it's very, very early days for AI internally. But I would say we are encouraging, you know, productivity, you know, usage by our employees to really get, you know, more work done through all of these tools and capabilities. And so I'd say we're really pleased, if you look at some of the numbers we reported, you know, I would say Xero's adoption of AI, whether that's in T&T or sales and marketing, where they're creating more, you know, assets using AI, or the average Xero who's using things like Gemini, and, you know, I'd say improve their mastery of their work and save time. I'd say that is like, you know, like, you know, it'd be hard to put a percentage on it, but I'd say that's another operational efficiency push we have here. And all those things drive through, we think, improved revenue per FTE, right? So that is a core metric that we use as a guide internally for, like, how are we creating operating leverage, you know, so. We want to always come back to, like, what's the use of those efficiencies for us? It's the ability to reinvest in the highest, you know, revenue growth opportunities and customer value opportunities. But that's sort of where the efficiencies are coming from. Okay.

Very clear. Thank you. Thank you. The next question comes from Siraj Ahmed from Citigroup. Please go ahead.

Morning, can you hear me okay? Yeah, we can hear you fine, yeah, that's fine. Yeah, so just a question on the video. So can you just comment on something that's slowing there from that whole rollout of cash flow central? And the second part of the video, I mean, Can you give us a view on Amulet's revenue at the end of the half, just to look at second half revenue and whether, you know, some of the cash flows into revenues is coming through in the second half, right?

So, Suraj, you broke up for quite a while there. I think you were asking about Cash Flow Central and Fiserv. Roland, is that correct?

Yes. So, just, I'm just, sorry, my network's not great. Just in terms of, you sort of said syndicate partners are not within your control, right?

because you're breaking up again I'm going to take my best guess at answering this question and obviously we can follow up offline if we don't get it right here I would say that we are we continue to be very excited about cash flow central and Fiserv and so are they I think if you look at even their own commentary on the importance of this product and their encouragement of their own customers to roll out and adopt, it's quite strong. All I noted is it's timing, right, on any partnership. It's always about the timing of those rollouts. So that was my point, more on short-term noise. Like, you know, when somebody said, well, what are we waiting for? I'm like, well, you could be waiting for a partner to play when it comes to within a half or within a quarter. That was my only commentary, but I think we continue to feel very excited about cash flow central. So does Fiserv, and I think they see it as a very important part of their stack.

Thank you. The next question comes from Paul Mason from Evanston Partners. Please go ahead.

I had maybe a follow-on to Sarai's question there. Are you able to provide any colour on how many banks FISA has been able to convert across so far? I was hoping you guys could comment a bit on thoughts around AI monetisation, whether you've sort of settled on potentially using tiering or add-on or just embedding it in the core price over time as to how you monetize, that would be great. Thanks.

Got it. Why don't I start with the AI question and then we'll come back to the other. So I think on AI, I think what we've noted is we are not, you know, monetizing AI this year explicitly. I think we think the pricing models are still early. We're seeing, you know, others take a combination of approaches. Some are doing consumption-based. Some are doing tiered. I don't think we have landed, Paul, yet on what model we will use this year for us. It's all about rolling out those key features like auto bank rec and getting utilization. But I don't think we have landed on a model yet. I think we'll have to find, I think, the cornerstone between simplicity and also the opportunity, you know, to make sure that the model of pricing reflects the value delivered. and this is going to be the balance. So right now, I think on Fiserv, Fiserv has talked publicly, so I think what we can talk about is what they've talked about, with 96 partners signed up since 2023 and 20 implementations underway. So those are Fiserv's own numbers, and that's all we're allowed to disclose.

Thanks, that's great. Thank you. The next question comes from Andrew Gillies from Macquarie. Please go ahead.

Thanks, guys. Can you hear me? Yes, we can hear you. Perfect. Thank you. I was just hoping you could expand on the commentary on improving mix, particularly in the back book. You mentioned some traction on the front book, and I think in the deck there was some commentary around more sophisticated sales motions. What are the opportunities there in the back book, and how can you address those?

Sure. Great question. So I think as we noted when we were at Investor Day, I don't know, about 18 months ago, the first thing we needed to do, and I think we've made good progress there, is get our sales teams to also be incented to drive value, not just volume. And, you know, the first moves have really been about improving the mix between PE and BE, business edition, in the front book. And we feel quite good about those. I think that the sales teams have made, you know, noticeable inroads. I think you can see it read through even in ARPU. You can see some mix shift in ARPU, and I think that's both a combination of our direct business as well as movements in the front book on the partner channel. I think the back book is a longer move because you've got, you know, we have 4.5 million customers now. And so even if you move an increment of them, for it to move the entire ARPU stack is quite hard. And what you're really doing is learning new motions, and you're learning new motions with new features. So when we say it's more complex, We're giving our sales teams training on SIFT. SIFT just rolled out in all of our products. So now our sales teams are learning the different SIFT features available at different levels of plans. And reminder, then you need to go to your back book and figure out which of their customer cohorts are even eligible for the right candidate. So you're now looking at a combination. I mean, these are very specific motions, right, of both sales teams knowing the products, but also cohorting your back book to even identify who's eligible for upgrades. So this is why we say it's a set of sophisticated motions. It's both data, it's orchestration, it's sales education, it's sales incentives. And that's just on SIFT. Then you think about payments. In the U.S., you think about Melio. So when we say sophisticated motions and back book, we mean it's often a combination of segmentation, orchestration, digital marketing, physical marketing, sales training, sales education, sales incentives. Now you get hopefully a picture of why we say the back book. is a set of more sophisticated motions and orchestrations that unlock over time. So I don't think you're going to see some dramatic one-half shift in ARPU. It's going to look more like steady motions and unlocking cohorts of customers who are eligible and the right targets for some of these products.

Perfect. Thank you. And then just a quick follow-up to that. We've spoken about improving back book mix, but if I think about the significance of the Melio launch in December, you've got the Gusto Beta going live soon. It seems like delivery is coming forward. The extent of churn to reduce as you get complementary software products being sold to the same customer. Have you done any internal modelling on the impacts to LTV or how you should think about the economics and how maybe we should start thinking about that?

We've done the modeling, yes. I think this is what gives us comfort in providing the overall aspiration. If you recall, and I think you hit the nail on the head, when we think about Gusto plus payments plus accounting together in one stack, A, you have the opportunity to play from an ARPU. And in the U.S., which actually has the smallest back book, right, just by virtue of its size, you're playing as much to win the next customer itself through the back book. And so, yes, I mean, our ability and confidence to give the aspiration statements we did was built on revenue synergies in both better front book acquisition with more to play for on ARPU, plus Melio's standalone business, plus some penetration of the back book. But as we said before, in the U.S. specifically, it's probably far more of a front book opportunity just given the size of the back book is not that big.

Perfect. Thanks very much. Thank you. The next question comes from Lucy Huang from UBS. Please go ahead.

Good morning, Secinda and Claire. I've got two questions. Sorry, another one on Nelio. You guys mentioned that Nelio Bill Pay will be available from December 2025, and I think Andrew just mentioned Gusto integration is on the way as well with the beta version. I should be thinking about, is there going to be a change in go-to-market strategy with Melio and Xero in the U.S. come end of this year? Should we think there will be a bit more brand marketing to sell that there is extra functionality, or are you still going to focus on performance marketing in the short term?

Sure. Well, first job, as you noted, is get that bill pay product and Gusto product out. And, you know, we noted Gusto's beta. So our first job is, like, get customers on the product, make sure they're happy with it. That is, you know, that is the job of this year. As we think about the go-to-market motions, I think we have optionality on brand, but let's also just talk before we talk about the optionality on brand to talk about the integration of our GTM teams. One of the things we're excited about is we do have more sophisticated GTM motions than the Melio team. We have a bigger team. And I think part of the improvement in performance is our ability to obviously performance market not just Xero.com, but also Melio.com, improve the performance marketing there, bring our muscles there. We have a very good performance marketing team, which alongside theirs we think can improve even exposure of performance marketing to their brand. Number two, we've got our AB Salesforce, also able to introduce Xero plus Melio, but also Melio. If the customer only wants Melio, that is another synergy opportunity. So I note first and foremost the integration opportunities in performance marketing and in the AV channel are not to be overlooked. Those are first yield opportunities. And then I think if you've looked at the OpEx guidance for this year, we're happy, you know, that we're able to realize more efficiency in the core because it gives us the optionality to think about what to do on brand, right? We talked a lot about that, hey, we'd like to be able to reinvest to growth areas. We've talked about brand being an opportunity for 27 that we're looking at. And I think if you put those two together, you know, we're excited.

Yeah, that's really key. And then just one last one for me. I think you mentioned, made a comment around having to include payroll into Australia into the lower end plans, and we saw a bit of speeding down from customers. Just wondering whether that's there's been a change, or how are you thinking about product mix being a bigger driver of after-growth moving forward, or should we see product mix being a more slower and steady contribution over the next few years compared to, say, the last two?

Yeah, it's a great question. So first of all, I think you were right to note the very deliberate decision to re-include payroll in our lower plans. That was, you know, really a reflection of us taking in customer feedback and, you know, and basically saying, okay, You know, let's make sure we're doing what's right for the customer. So we reversed that decision. So that would have led this year, obviously, to a bit of pressure on ARPU in Australia as more people then, you know, went back to those plans. So that's kind of a short-term effect. I think the way to think about ARPU long-term in Australia is, I'd say, very steady as she goes when it comes to improving front book attach. But remember, Australia has a big back book. So... This is a place where it will be very much those sophisticated motions we talked about across both SIFT and payments in Australia, leading to sort of consistent kind of steady ARPU improvements. And then, of course, every year what we decide to do on price is a big factor in ARPU in any given year. This year we made a very deliberate choice in addition to adding payroll back This year we did not take up the price on our bottom-most SKUs in Australia. So that's pretty notable in this year's ARPU, right, for Australia. It did not include a price rise on the bottom two SKUs.

Yes. And so in terms of ARPU growth in Australia for this year without the bottom plan, I think price rises. Like where would the growth come from?

Well, we did make, as we said, ARPU is a factor of a mix of items. in any given market. This year, ARPU would be a mix of the plans that did get price rises in Australia, front book and back book, any mixed improvements. It would be a function of payments attached. Remember, we have a big invoicing business where we are attaching payments also to invoice volume, and that business grew last year, you know, this year it grew 30. I don't have the numbers handy. Somebody remind me what it grew. It is more at 30, 30. 35%. Sorry, guys, I was just grappling with the numbers in the deck among all the numbers we have. So remember, we also have payments attached of our invoicing payments in that number. So those are all the contributors. And then we have currency effect, obviously, at the group level, also creating some ARPU movement.

Wonderful. Thank you so much.

Thank you. The next question comes from Srihash Singh from Bank of America. Please go ahead.

Thank you. I've got two questions. One, just following up on the Xero and Melio integration timelines and wondering how long would it take you to integrate the Xero accounting solution into cash flow central product suite? And do you need a full integration on that to realize the full benefits of cross-sell and syndication network? And just on that timeline, I'm wondering if the cash flow central integration could happen faster than the analytics integration, which you've just done and rolled out. And second question, the latest round of pricing was really interesting. You kept pricing flat. for the lower-end subscription plans. However, the higher-end plans have gone up 11% to 15% in Australia at least. So should we expect more of that? And what do you need to grow with the higher-end customers? Do you need some M&A there, or do you think you have a product which can allow you to grow with the top-of-the-line customers? Thank you.

Okay, I think there were three questions in there, so let me take them in hand. First of all, I want to take the Nelio integration question. You might have noted in the half that Xero announced its first embedded accounting deal with BlueVine in the U.S. This is the first time we are embedding our accounting stack in someone else, and we talked on the Nelio announcement about the opportunity to also, if appropriate, embed Xero in the Nelio stack. Now, keep in mind, that was we said upside to the plan. We didn't say that. We said that's something we're going to do, but we didn't factor it into our numbers because we needed to figure out which of Emilio's customers would want embedded accounting. Some of them might just, you know, might just want bill pay. Some of them might be happy to do a referral deal, and some of them might want to have, you know, accounting in their stack. So we always talk about that as experimental and upside. And that's the same way we've talked about the blue line deal that we just announced. We're really excited to get it out and see what it does. But I wouldn't say we factored it into our financials. So we'll see where that goes, and we're excited to innovate and try. Number two, on Australia, as you said, you noted that we were more granular in our pricing moves. I think you can expect us to be more granular. At any point in time when we do pricing, I think we have, like, moved in the last several years from, like, a one-size-fits-all price rise to very much by segment, by market, looking at the features we've launched, our competitive placement in market. And we like that. I mean, I think the customer deserves that granularity. So we make granular decisions, and I think we feel like we always want to be looking at kind of position and range of different segments and SKUs in market against the alternatives and for the value we've delivered. And that leads to point three, which I think is about you noted that we did a double-digit price rise on our higher end. Look, when you look at the value we deliver at zero compared to the size of that customer and willingness to pay and the type of features and delivery, I mean, think about the fact that, you know, we have now multiple levels of fixed functionality across our plans. I mean, these are products that if you were to buy them stand-alone – would be expensive in their own right, a lot of the functionality that we're now incorporating into our higher-end plans. So I think willingness to pay always factors into how we price, as well as the product feature delivery, which I think leads to your last point, B. Is there more to do in the higher end? Yes, I think there certainly is. We see customers who are on our top SKUs, and we have relatively low penetration of our top SKUs, even in a place like Australia, with a lot of room to deliver more features and functionality. You know, they ask us for things like transaction limits or permissions or multi-entity reporting. By the way, multi-entity reporting is within SIPP, multi-entity consolidation. There's a long list of features that I think are still opportunities for Xero to go drive higher penetration of those top higher-end customers and our higher-end SKUs.

Thank you. Thank you for the call, Esther.

Thank you. That does conclude the Q&A session. I'll hand the conference back to Sakinda for closing remarks.

Of course. Thank you again to everyone who joined today's call. We appreciate the time, the support, and, of course, look forward to connecting again soon.

Thank you for joining the Xero Limited 2026 Interim Results Conference call. If you have any further questions, please contact the Xero Investor Relations team. If you are a media representative, please reach out to the Xero's Corporate Communications team.