Thank you for standing by, and welcome to the Xero Limited half year 2022 results conference call. I am joined by Xero's Chief Executive Officer, Steve Vamos, and Chief Financial Officer, Kirsty Godfrey-Billy. All participants are in a listen-only mode. There'll 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. Please limit your questions to one question at a time. If you wish to ask a further question, please rejoin the queue. I'd now like to hand the call over to Steve Vamos, CEO of Xero. Please go ahead. Well, [Non-English content] from Wellington, New Zealand. Thank you for joining our investor briefing today covering Xero's financial and operating results for the six months ending September 30th, 2021. I'm Steve Vamos, Xero's CEO, and I'm with Kirsty Godfrey-Billy, our CFO. Just before I go over today's agenda, I do wanna start by acknowledging that COVID-19 does continue to create uncertainties for many people, and I hope that you and those you care about are safe and well. The first item on our agenda is a business update, including a review of Xero's performance during the half. I'll also touch on our strategy and areas of investment before I pass to Kirsty to cover our financial results in detail and Xero's FY 2022 outlook. We'll then move to your questions. First and foremost, Xero delivered a strong result reflecting the benefit of investments made over a number of years in our products, go-to market, and people capabilities. In fluctuating global operating conditions, we've continued to demonstrate our ability to execute our strategy. Adoption of digital solutions by small business continues to gather pace, driven by a number of factors, including government policy initiatives, innovation in access to financial services, and new ways of working. We continue to monitor the macroeconomic environment and are positive about the critical role small business will and continues to play in the global economic recovery. These factors, the size of the opportunity, and our momentum give us continued confidence in our long-term strategy. Moving to a summary of our results on slide five, you'll see that this is a strong result across multiple metrics. Key amongst these is operating revenue, which grew to more than NZD 500 million in the half, and subscribers, which grew to more than 3 million. Both were up 23% on prior year, and in the case of revenue, 26% on a current, constant currency basis. Net subscriber additions totaled 560,000 over the prior year, or 272,000 over the six months in the half. Annualized monthly recurring revenue or AMRR grew to exceed NZD 1 billion, increasing 29%. This largely reflects subscriber growth of 23% and higher ARPU. ARPU increased 5% versus the prior year period, and Kirsty will talk more about our actions that contributed to this movement in her remarks. Subscriber lifetime value or LTV increased substantially to NZD 9.9 billion from NZD 6.2 billion with continued low levels of churn effect. During the half and consistent with our outlook for the year, we increased investment spend back to pre-pandemic levels, which led to reductions in our EBITDA, net profit, and free cash flow when compared to the prior year period. EBITDA for the half year of NZD 98.1 million decreased by 19%. We reported a net loss after tax of NZD 5.9 million, down NZD 40.4 million. Free cash flow declined by NZD 47.9 million to NZD 6.4 million. This increase in investment reflects our commitment to execute our strategy and pursue our long-term opportunity and aspirations. Our ability to do this is, to a large extent, a function of the strength of our business model and the sustained revenue momentum shown on the next slide. Xero delivered high sustained levels of annual top-line growth over the last few years against what has been a challenging COVID backdrop. Touching on the first half of FY 2022 specifically, core accounting revenues grew 18% or 20% on a constant currency basis, and this was largely in line with our subscriber growth of 23%. Price changes during the period have contributed modestly to operating revenue in the half in all regions outside of North America and rest of the world, where the communicated price changes will take effect in the second half. Platform revenues grew 104% or 37% if we adjust for the inclusion of revenues from acquired businesses, as take-up and usage of financial services and adjacent products continues to grow. I'd now like to discuss the results of our operations by geography. All markets contributed positively to this group-wide outcome, although the pace of growth varied, as you'd expect, given the differing conditions in each market. Starting with Australia and New Zealand on slide seven. In Australia, revenue increased by 22% to NZD 225 million. We added 124,000 subscribers in the half, reaching 1.24 million in total. Earlier this year, we welcomed Joseph Lyons as our MD of Australia and Asia. Joe moved into the role from the role of EGM of Global Partner Sales and succeeded Trent Innes, who departed Xero after eight years of leadership and a great contribution to Xero. New Zealand's revenue increased by 13% to NZD 72 million. We added 34,000 subscribers in the half to reach 480,000 subscribers in total. In these two markets where cloud adoption is relatively high, it was pleasing to see Xero delivering double-digit subscriber growth. We believe this points positively to the high potential levels of adoption in our international segment. Turning now to our international segment and starting with the UK Revenue increased by 24% to NZD 133 million. Net subscriber additions of 65,000 for the period brought subscribers to a total of 785,000. Despite deadlines for the implementation of Making Tax Digital for income tax being deferred by HMRC, we continue to invest in best-in-class cloud-based compliance, as reflected by the launch of Xero's personal tax product in the half. We've also just announced Alex von Schirmeister as our incoming Managing Director of UK and EMEA. Alex brings more than 25 years of relevant leadership experience, having worked in e-commerce, payments, and telecommunications. From next month, Alex will succeed Gary Turner, who announced in July he would step down as MD after 12 years in the role with Xero, and I look forward to having Gary as an advisor to us beyond his tenure as MD. In North America, we added 23,000 net subscribers, more than double the additions seen in the first half of last year. Subscribers reached 308,000, which is 23% up on the prior year period. Revenue increased by 5% to NZD 30 million. In constant currency, revenue grew 14%, with the U.S. being one of the markets most impacted by currency movements in the period. The revenue result also reflects our continued focus on serving customers through the partner channel, and also a price reduction to standalone Hubdoc plans in the second half of FY 2021. In terms of partner engagement, we signed new agreements and expanded existing partnerships with a number of accounting firms across the U.S. and Canada, such as Liberty Tax, Bernard Robinson & Co, and Padgett. I'm also happy to confirm that Xerocon is returning next year. We have announced Xerocon New Orleans in May, and we're looking forward to connecting with our existing and new partners at our Xerocon events again. We continue to invest more in the localization of our products for North America. For example, we delivered enhanced provincial sales tax tools in Canada for a number of provinces, and improved balance sheet and other reporting in the U.S. Our aspirations for North America are beyond what you see in our performance right now. We see a significant opportunity to bring our compliance playbook to address an estimated TAM of small businesses of more than 30 million. I'll talk more about our work here in my discussion about our investments shortly. In our rest of world markets, revenue grew 72% or 85% in constant currency to NZD 46 million. This includes the majority of the revenue contribution from Planday. We ended the period with 201,000 subscribers in rest of world after adding 26,000 in the half. 6,000 Planday subscribers were added at the beginning of the period from the acquisition. We continue to deliver good progress in Singapore and South Africa. Both businesses are scaling rapidly in attractive markets. In South Africa, we expanded our VAT e-filing beta, so now customers have the ability to make end-to-end VAT lodgments directly with the South African Revenue Service. To better meet local customer needs in Singapore, we introduced Singapore dollar billing in the half, and this has had good take-up from new and existing customers. Moving to slide 9, platform revenue now accounts for a double-digit portion of Xero's operating revenues. I'd like to spend some time discussing the activity indicators for the 3 largest contributors to this very important, strategically important part of our business: Planday, payroll, and payments. Planday's performed well in our 6 months of ownership. This has been a period characterized by some volatility within the countries and service sectors that Planday targets, but the demand for the product remains strong. We continue to work towards the launch of Planday in our other markets in the near future. On the left, we show the number of Planday employee users each quarter since September 2020, and average employee users increased by approximately 20% from the prior year period in the three months to end September 2021. The middle chart shows employees paid through Xero Payroll over the same time. This has grown by 19% since this time last year across Australia, New Zealand, and the UK where we offer the product. The right-hand chart shows monthly invoice payment value has grown by more than 40% since September 2020. Over the next few slides, I'm now gonna update you on progress we've made on investments to support execution of our strategy. Now, the main area of investment is our people, where we continue to attract and retain great talent. In a competitive labor market, hiring with a focus on product and technology teams saw our FTEs grow to more than 4,000. This was a 30% increase year-on-year or 22% excluding acquired businesses in line with growth across our business. In August, we adjusted our flexible work policy, and we introduced new permanently remote roles, which seek to take advantage of an expanded potential talent pool. Now highlighting some of the product developments our teams have delivered in the half, these include a comprehensive set of updates to bank reconciliation, one of Xero's most used features. The look and feel of bank rec was refreshed as part of a broad technology initiative that's going to see similar changes across many other Xero products and features in the future. We also leveraged machine learning to increase the accuracy of bank rec. We launched a new suite of forecasting tools called Xero Analytics and Analytics Plus. These are powered by AI, artificial intelligence, and enable more meaningful conversations between our customers and their advisors around cash flow. Looking to the small business platform, our invoice lending platform model entered an agreement with Australia's largest bank, the Commonwealth Bank of Australia, to support a new and innovative invoice financing offer. We also enhanced the Xero Me app to include the functionality of Xero Expenses. Xero Me works with our payroll solution, so that employees of our customers can access their payslips, leave timesheets, and now make expense claims all in the one app. Moving to slide 11. In August, we progressed our platform strategy with the introduction of the next evolution of our app marketplace, the Xero App Store. The Xero App Store lets small businesses choose their own toolkit of apps to manage their business, and there are now more than 1,000 connected apps within our ecosystem to choose from. Using machine learning, we've made it easier for small business customers to discover apps through personalized app recommendations and a search function in the App Store. Through the Xero App Store, we're also providing app partners with greater support and features to scale their businesses and reach more customers. With the launch of the Xero App Store comes a shift to a more commercial model with Xero receiving a referral revenue share of 15% of subscriptions for new customers who sign up through the App Store. Turning to the next slide. Today, we've announced we're acquiring LOCATE Inventory, a U.S.-based cloud inventory management provider. This transaction will enable us to better support the inventory needs of small businesses and enhance our e-commerce capability. Our plan is to embed LOCATE's talent and capability within Xero to enhance our inventory management solution and help meet increased demand for inventory and cash flow management tools by small businesses. Customers will be able to track and manage inventory in real time across multiple locations and channels, including a number of Xero's e-commerce partners. The new inventory solution is expected to launch to U.S. customers first before being made available in other markets. As a further step to enhance our e-commerce capability, today, we've launched a new integration with Shopify, available in the Xero App Store and the Shopify App Store. This will help Xero customers to simplify reconciliation, interpret sales data, and use various insights within Xero to support running their business. We've also joined the Shopify Plus Certified App Program. This program is for a select group of Shopify partners that support the advanced needs of their global merchants. I wanna finish my remarks with slide 13 and some comments on our strategy and approach to investment. Our strategic priorities are to drive cloud accounting adoption, grow the small business platform, and build Xero for global scale and innovation. We've made good progress on these through fluctuating global operating conditions as evidenced by our H1 FY 2022 results. Progress on M&A aligned with our aspirations to provide small businesses with access to financial services and workforce management. What you see in Xero today is a result of investments made over many years. The investments we're making now are crucial to realizing the significant long-term growth opportunities we have. With that in mind, I wanna share with you some further detail about the areas of investment we're currently focused on to support these priorities. Firstly, in driving cloud adoption or cloud accounting adoption, the cloud accounting market is still young and under-penetrated. We're early in the adoption of cloud accounting and business applications by the 45 million-plus small businesses we estimate there to be across our existing markets. Three areas of focus in investment are North America. We're focused on building products and functionality to better meet the needs of our customers. Our product roadmap is key to our execution in North America. We're exploring how we might leverage partnerships and acquisitions alongside our product development plans in this important region. We also continue to explore products that extend our TAM towards customers with less complex needs. For our accounting and bookkeeping partners, we're continuously working to create more modern practice and compliance tools to help them better serve their clients and run their practices. Under the small business platform, our focus areas are providing more seamless access to financial services within Xero workflows, particularly in the areas of payments and access to capital, and leveraging our acquisition of Planday to bring together our capabilities in the areas of payroll and expenses to better support employing SMEs and their employees. We estimate the TAM opportunity here is more than 100 million employee users. Finally, to support our third strategic priority, building for global scale and innovation, our efforts include investing in the technology, product, and business capabilities to enable a number of critical functions. These include reaching and communicating with our customers in flow and in real time through our product and digital platforms. Continuously evolving our product and technology to fully leverage AI and machine learning in order to generate data-based insights that help our customers better manage their businesses. Investment in our people, capabilities, and operational processes. The timing of 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. We remain extremely confident in the opportunity ahead of Xero to build our customer and partner base and to deliver on our purpose. Before I conclude, I want to acknowledge that this half has been challenging for many of our teams around the world as they work under varying restrictions and conditions due to COVID-19. I really wanna thank them for their hard work as they continue to do all they do to support our customers and partners. Now I'll pass to Kirsty to cover our financial results and discuss Xero's FY 2022 outlook. Thanks, Steve. As Steve said, I'll now take us through our financial results for H1 FY 2022 in more detail, starting on slide 15. The results show Xero has delivered consistent momentum over the first half of FY 2022. As you can see on the left, AMRR grew by 29% to NZD 1.1 billion, driven by subscriber growth of 23%. We also saw ARPU increase by 5%. The charts in the middle and on the right show EBITDA of NZD 98 million, and free cash flow of NZD 6.4 million. EBITDA fell NZD 22.7 million, and free cash flow declined NZD 47.9 million versus the prior year period. The decline in these profitability indicators capture the increase in operating expenses anticipated by guidance provided at our FY 2021 results. The expenses represent products and technology investment commitments and a return to more normal rates of sales and marketing spend. Moving to the next slide. The strength of Xero's business model continues to underpin our sales metrics, including growth in LTV. On the left, you can see Xero's total LTV increased by NZD 3.8 billion versus the prior year period to just under NZD 10 billion. By segment, LTV increased by 55% in ANZ and 80% within international markets. Growth in both subscribers and LTV. Subscriber growth was strong in Xero's international market, assisted in part by our Planday acquisition. Before I discuss the drivers of these outcomes, I want to touch on some of the related quality metrics. These are LTV per subscriber, CAC or customer acquisition cost months, and LTV to CAC. These aren't on the slide, but you'll find them in the appendix. The increase in total LTV has come from the 23% increase in subscribers, together with a 31% increase in LTV per subscriber to nearly NZD 3,300. CAC months decreased from 14.8 months at the end of FY 2021 to 14.2 months. This reflects consistent trends within the ANZ segment and some improvement in our international segment in H1. The LTV to CAC ratio increased to 7.4 from the 6.4 at the end of FY 2021. CAC per gross subscriber addition was essentially unchanged in the period, meaning the change in this ratio was primarily from the growth in LTV per subscriber already mentioned. Now, on the right-hand side, we've given you some additional disclosure around the drivers of LTV. This chart shows the development of Xero's LTV over the first six months of the year, broken down by driver. With the exception of FX and other movements, all of the underlying contributors have trended positively over the period. ARPU represents the monthly recurring revenue per subscriber at the end of the period. Within the first six months of the year, ARPU increased by 7% in constant currency to NZD 31.32. Gross margin increased again to an 87.1%. I will discuss churn in further detail on the next slide, and the fall in churn was the largest single contributor to the uplift in LTV. New subscribers added in the half were the second largest contributor to the movement in LTV, with the acquisitions of Planday and Tickstar also adding to the overall movement as shown on the slide. I now want to come back to ARPU and churn. On the left of slide 17, we show the main contributors to the movement in ARPU over the first half. Overall, ARPU has increased by just over NZD 2 driven by the following. Price increases communicated to customers in May were effective in the three major markets of Australia, New Zealand, and the UK from mid-September. Collectively, these were one of the largest drivers of the ARPU increase. The acquisition of Planday also had a relatively large positive impact on ARPU. On acquisition, Planday added approximately 6,000 subscribers with a typical monthly ARPU quite a bit higher than a regular Xero subscriber. While FX movements were unfavorable in the period, product mix and other factors, including take-up of financial services and ecosystem, accounted for the remainder of the ARPU increase. The right-hand chart shows the movement in churn seen in the period relative to long-term trends. Churn fell across the group to an all-time low of 0.88%. The trend towards lower levels of churn has been observable across all of Xero's markets. We believe the disruption caused by the pandemic has enhanced awareness of the value and importance of cloud accounting to our small business customers and accountants and bookkeepers. However, we remain mindful of potential cyclical risks and the SME segment's exposure to the macro environment. Having discussed our progress on LTV, I'd now like to touch on our gross profit and expenses. On the left-hand chart, service cost to serve efficiency gains contribute to improved gross margin. This increased 1.4 percentage points versus the prior year period to 87.1%. The improved margin profile, combined with a 23% increase in operating revenue, saw gross profit increase by 25% to NZD 440 million. It's worth noting that acquisitions completed this period have had no meaningful impact on gross margin for the group. The largest of these, Planday, has a contribution profile that is largely consistent with Xero's existing operations. Turning to the chart on the right, total operating expenses increased by 46% versus the prior year period to NZD 422 million. This equated to 83.4% of operating revenue, inclusive of integration costs incurred in the period. Looking at operating expenses by type, the way we've run the business in this half versus the same period last year is evident in sales and marketing costs. These increased from 32% of operating revenue in the prior year to 37%. Sales and marketing costs have proven effective at driving strong subscriber additions achieved in the period. We have also taken specific actions to support brand awareness campaigns across TV, online, and out of home. We launched a number of innovative campaigns in the period, including targeted sponsorship of sporting events such as the Lions Tour of South Africa, and use case examples including Nine's The Block, a popular reality TV show in Australia, where contestants and the resident accountant on site use Xero for tracking their renovation budgets, sending invoices, and managing receipts. We continue to see the return on investment on brand awareness spend as attractive, particularly in newer markets where Xero has less presence compared to ANZ. Product design and development costs accounted for 33% of operating revenue, up from 27% in the prior year period, but in proportion to the level of spending seen in the second half of FY 2021. Our investment into product remains crucial to supporting customers and delivering on our long-term product and strategic plans. G&A costs were largely consistent with levels seen in the past at 13% of operating revenue. Integration costs associated with the acquisitions of Waddle, Planday, and Tickstar are included in all of these operating expense measures, but in isolation amount to just under NZD 3 million. To sum up, the strong growth margin and revenue progress in the period has enabled investment into CAC and product development that continues to support our long-term aspirations. Moving to slide 19. Here we have our summary income statement for H1 FY 2022, showing year-on-year changes. Operating revenue increased 23% to just under NZD 506 million. Revenue growth for the year was ahead of growth in subscribers, helped by the ARPU factors I've already mentioned and the contribution from the businesses acquired over the last year. Collectively, these added NZD 19 million to operating revenue in the period. As already discussed, gross margin improved to 87.1%. To elaborate on some specific examples of operating expense movements, which you can find in note five of our interim report, advertising and marketing costs have more than doubled over the prior year period and are now back to similar nominal levels to those in previous periods. Travel costs increased almost tenfold, but are still at a small fraction of pre-pandemic levels due to lockdowns and continued travel restrictions. These costs would be expected to change further as travel moves back to pre-pandemic levels. A relatively large increase in consultant and contractor costs reflects the more limited use of these resources in the prior year period. These costs support our strategic investment into product and the integration of recent acquisitions. The movement in cost has resulted in an EBITDA margin of 19.4%, a decrease of 10.1 percentage points. A net loss of just under NZD 6 million was NZD 40 million lower than the prior year period. This was primarily due to the operating expense envelope I've discussed, but there are some other items to flag. These are impairment charges totaling just under NZD 3 million related to the software and other intangibles, and finance costs include a non-cash charge of NZD 3 million related to the unwind of the discount applied to acquisition earn-out. Prior to payment of these earn-outs, the related amounts are recognized as a contingent consideration liability on the balance sheet and are subject to discounting that amortizes through the income statement as a non-cash interest charge. Adjusting for this charge, underlying finance costs were consistent with the prior period. Moving to slide 20. Cash generation and other movements in the period brought Xero's overall liquid resources to almost NZD 1.2 billion at the September 30th. This comprises cash and cash equivalents, short-term deposits, and undrawn committed debt facilities of NZD 150 million. Deducting our total term debt liability of NZD 883 million, our net cash position at the end of first half was NZD 125 million, down NZD 132 million from the end of FY 2021. The main movement in our cash position over the period came from NZD 136 million in acquisition payments. These mostly comprised initial cash considerations for the acquisitions of Planday and Tickstar, which were completed at the start of the period. Before I move on to the outlook, I wanted to recap our approach to capital allocation. We continue to prioritize reinvestment of cash that we generate in order to support our strategy and the potential we have to create significant long-term value. Day to day, most of our investment will focus on the areas of go-to-market and product development to drive top-line growth. We also continue to evaluate potential investment opportunities, including M&A, that can further enhance or complement our strategy. Now to our outlook on the last slide. You can read our full outlook statement here, but I'll point out a couple of key elements. You'll remember the last 18 months have seen us shift from an initial rapid response to the uncertainty of the pandemic, progressively back towards a long-term focused growth setting. Our guidance on operating expenses for FY 2022 continues to reflect this and remains unchanged, except for the acquisition we have announced today. We expect total operating expenses, excluding acquisition integration costs as a percentage of operating revenue to be in a range of 80%-85%. In addition, we expect integration costs associated with all the acquisitions announced since the start of FY 2021 to increase total operating expenses as a percentage of operating revenue by up to 2% for FY 2022. Given our performance in the first six months of the year, it is worth emphasizing that both elements of the operating expense guidance relate to Xero's full year performance for FY 2022. Lastly, as previously stated, Planday is expected to contribute approximately 3 percentage points of additional operating revenue growth in FY 2022. That concludes our presentation. Thanks to everyone for joining us online and by phone today. I'll now pass over to the moderator for your questions. Thank you. If you wish to ask a question, please press star then one and wait for your name to be announced. If you wish to cancel your request, please press star then two. If on a speakerphone, please pick up a handset to ask your question. Also, please limit your questions to one at a time. If you wish to ask further questions, you will need to rejoin the queue. Our first question comes from Rohan Sundram of MST Financial. Please go ahead. Hi, Steve and Kirsty. Thanks very much. Just the one from me. Keen to understand from your perspective, how the acquisitions over the last 12 months have been performing. I take on board the slide nine detail in the commentary, but just overall, how do you feel about them now that most of them are bedded down or all of them? Yeah. Look, thanks, Rohan. Good question. Look, we're very pleased with the progress. It still is early days. I mean, we completed Planday and Tickstar at the very beginning of the half. But look, everything about the strategic rationale for the acquisitions, very pleasingly the people in the organizations we've acquired and their alignment and purpose, but also the way they've engaged has been really positive. We've continued to evolve and work on our plans and programs going forward. Very pleased with the progress overall. Thanks, Steve. Our next question is from Garry Sherriff of RBC. Please go ahead. Hi, Steve and Kirsty. Thank you for taking my question. I'd just like to ask around the price changes. You did obviously put through for some of the bigger markets recently. Can you maybe just talk to us around the planned price changes over the next six t o 12 months in those other markets and/or if there's more potentially coming for your core big ANZ UK markets? Thanks, Gary. As we announced in August, there is gonna be a price change that goes through North America and rest of world in the middle of November. Now, this is for only the business edition customers. You know, that's out there in market. As far as what we can tell you about further pricing in the future, you know, there's nothing to be seen here at this stage. However, you know, as we've stated before, we very much look at increasing our prices based on the level of value we are providing to the small businesses and accountants in the bookkeeper channel. You know, as we put more into product development and as that value increases, then we believe that gives us the ability to be able to increase the prices at that time. Thanks a lot. Thank you. Thanks, Garry. Our next question is from Stephen Ridgewell of Craigs Investment Partners. Please go ahead. Good morning. Can you talk a little bit more to the improvement in international churn from so 1.5% a month last year to 1.2% a month? Just interested in your thoughts as to what extent does that improvement reflect kinda increasing average age of the customer base, you know, maybe a little bit from acquisitions, more cyclical drivers or other things. Just also interested in your thoughts as to whether, you know, you're expecting to see, you know, that churn rate continue to kind of trend downwards in those international markets. Thank you. I'll take this one, Steve. Stephen, yeah, I mean, the... We're very pleased with the churn result. You know, it's continued to lower. You know, we were pleased with how it was at March, and it's, you know, fallen to, as I said, 0.88% for September. This was both across the ANZ and the international segments. Obviously, more of an impact across the international group. I mean, in ANZ, we're now at 0.67%, which means that, you know, if you look at the lifetime of a customer, it's now over 12 years. You know, there's probably, you know, we are very thrilled with our ANZ number at the moment. International, you know, down at 1.2%, has also been an improvement, and it has been improved across all of our regions within the international segment. We still, you know, as is sort of known, most small businesses, about 50% of small businesses go out of business in the first five years. Even in international now, we've got almost seven- year lifetime of a subscriber, which is, you know, better than the average small business. You know, we've seen that come down. We've seen it as we have, you know, improved the quality of our subscribers that have come through. You know, also, as we have looked at moving our go-to-market, you know, and building up that centralized resource, it's really increased the focus on global sales and marketing disciplines and processes. And of course, externally, things that we can't necessarily have that much impact on. You know, we have seen an increase of cloud adoption. COVID has certainly been a good factor that has helped us with that, along with government digitization as well across the region. You know, who knows what will happen with churn in the future, but we're certainly pleased with where it sits today. Okay, thanks. Then just maybe pivoting to North America, you know, with a 14% constant currency revenue growth in that market in the first half, are you able to give us a little more color on the relative performance of, you know, the U.S. and Canada? Obviously, they'll pull out a bit of a newer market entry for you. Stephen, I think also we did touch on the fact that repricing standalone Hubdoc subscriptions also played a part there, and that if you factor that in, you get a revenue growth figure that is closer to the subscriber growth. We do continue to execute across both Canada and the U.S. with a focus on the partner channel. We don't break that out, but I think that essentially what I would say is that the markets are very different in terms of the way we go about them. However, there are a lot of consistency at this stage. Really, the consistency is about the way that we approach our customers in those markets and go to market. The progress we're making is consistent across both the U.S. and Canada. Thank you. Our next question is from Lucy Wang of Bank of America. Please go ahead. Good morning, Steve and Kirsty. Thanks for taking the question. I just wanted to ask about Planday and Tickstar. Given, have you had any early thoughts into the strategy of the integration moving forward? Are we likely to see these products being bundled into the core Xero plans or still monetized separately? Just wondering if there's been any early thinking around that. Thank you. Yeah. Look, Planday and Tickstar are a little bit different. I think your question is spot on in the context of Planday, where essentially there's a great opportunity for us to bring the functionality of Planday to many small businesses. That is the objective of the collaborations we have in terms of reaching that smaller small business segment that we can really serve well. That's a big focus for us, while Planday does continue to serve and support small business and medium businesses that have larger employee bases than you know a typical Xero subscriber. That's a great opportunity for us. We're working on that, and obviously keen to see Planday in the markets where Xero has presence. Tickstar is a little bit different because Tickstar's about a capability around the e-invoicing. That's kinda distributed more equally across all markets by virtue of the capability we have, as we develop our e-invoicing offerings and continue to do that in each of the markets around the world. Look at Tickstar more as a capability and Planday as this application suite that can really help any small employing business. Thank you. Thank you. Our next question is from Roger Samuel of Jefferies. Please go ahead. Oh, hi. My question is around the TAM. You mentioned that your TAM is about 45 million small businesses, and also 100 million employee users. I just wanna clarify a few things. Firstly, do you include Europe in that number? And secondly, do you discount the number, you know, to account for small businesses and casual employees for Planday? Thirdly, just wondering, with the acquisition of LOCATE in the U.S., are you able to address product businesses that are in the goods space? Roger, on the first one, the numbers we publish are about the English-speaking markets that we are in, just to be clear. On your second question, it is very spot on. We see great opportunity to support goods selling businesses, small businesses. In fact, the significant growth in e-commerce and the fragmentation between different systems that small businesses use, some you know in terms of operating their business once they enter into the e-commerce world, is something that we can really address by having a strong inventory offering that connects their sales activities through their e-commerce channels, and many of them will have more than one, to their accounting and financial systems. That means they can get a much, much clearer and cleaner insight to how their business is performing, and also a really good insight into the quality of their inventory and the way that they're moving stock through the different channels. Mm. Absolutely a big motivator to what we're doing. Yeah, just to follow up, is it fair to say that your current customer base is mainly service-based businesses as opposed to- No, we- Yeah, selling goods? No, no. We do have plenty of retail customers, and we participate across both sectors, both the services sector and the goods selling sector, if we call it that. It's really about everything we're about, which is that there's a long way to go before all small businesses are getting the value out of cloud-based accounting and cloud-based software. When we look at our growth opportunities, we look at the segments of small business and the applications that small businesses can most get benefit from. E-commerce and inventory is obviously a significant one and an important one for us. Okay. Great. Thanks. Thanks. Thank you. Our next question is from Elise Kennedy of Jarden. Please go ahead. Hi, Kirsty and Steve. Great to get some more disclosure around the growing platform revenues and the role of acquisitions. I just wanted to tap further into that App Store. I know it's early days since you've changed that revenue model, but I'm curious to know if you're willing to share, of those 100,000 customers you have on there, what percentage are on that revenue share today? Do you know if your peers are also taking a fee or a revenue share from the customers, and if that's become a friction point to adding them at all? Thanks. Elise, I just missed that last part of your question about the second part, I think it was, about who's taking revenue share. Can you just say that again? Just wondering if any of your peers are following a similar revenue share model or if they've kept it free and if that's become a friction point at all? Look, it is, as you said, Elise, it is early days, and it's really too early to start sharing the progress. You know, we've literally launched within the last eight weeks, so it's a little bit early to say so. Certainly, we've got a great, very positive reception to the commercial terms that we put out at 15%, because when you do look across the industry at similar organizations with their App Stores, the 15% or the share that we're receiving is very competitive and it seems to be very fair in the context of what we're doing. Great. Thanks. Thank you. Apologies. Our next question is from Siraj Ahmed of Citi. Please go ahead. Thanks. Steve, it seems like there's a bit more increased enthusiasm or confidence on North America. Just keen to hear your thoughts on, you know, how you're placed on that. Secondly, what do you see as the big gaps that you need to address to grow the U.S. business, and the NZD 30 million TAM that you have for that market? Yeah. Look, as you say, it's a big opportunity, and it's still a market where most small businesses are not supported or served by cloud accounting and cloud-based business applications. You know, we're really pleased with the 23% subscriber growth that we had. Interestingly in that, we're getting endorsements from customers and partners on the value of Xero and their desire to do business with Xero. You know, it's called out some of the successes we've had with some significant partners. The focus in North America is actually it is different but follows the same fundamental elements that have led to our success in Australia and New Zealand in particular, which is really to make sure that our product roadmap supports a greater degree of seamlessness and integration of workflows. You know, if you can wire compliance, payroll, and accounting together along with a strong app ecosystem and applications, you know, that is the future opportunity we have in all markets to get all small businesses to really benefit from that. We also get a lot of encouragement from partners in the North American market, and we've got good partnership with Gusto in payroll and many other partners. It's a very fertile area of opportunity. Acquisitions, such as the one we announced today, also give us an opportunity to further fill out our product roadmap for North America. You know, we know there's a big opportunity. We have big aspirations beyond where we are today, and at the end of the day, it comes down to executing on the fundamentals and that's what we intend to do. Beyond that, do you reckon you need to increase your product dev for the U.S. market or the current levels, enough for that? Sorry, I didn't quite hear the question. The product development as a percentage of revenue, which is the investment development in R&D. Do you reckon you need to increase that, or do you think current levels will suffice? Yeah. Look, I think that there's two questions in the question around the overall and then specifically to North America. I won't answer on the overall, but I will. In terms of North America, it's a priority for us. We'll continue to invest commensurate with the opportunity and also the return we see long-term for the North American market. Thank you. Our next question is from Paul Mason of E&P. Please go ahead. Hi. I might jump back in the queue for a second one as well. In terms of your addressable market discussion that you've had today, one of the things that seems to be jumping out is, you know, around Australia in particular, where I think you guys have communicated about 2 million addressable market in the past there. If I add up your number, Intuit's numbers and MYOB's last disclosed numbers as well, sort of looks like it's gone past that, and you're still growing 20%+. Maybe, could you give us a bit of color in terms of like sort of how you're thinking about where penetration rates are at there and sort of, you know, what other forces might be driving growth rates if it's not just that we're still right in the middle of the adoption curve? Yeah. I'd say, I mean, I suppose when we first go into a market, the only way that we can really get the number of, you know, the total number of TAM is by looking at, you know, say for example, companies registered, information that we can get from tax authorities. Many times the data that we get doesn't include the level of, I suppose, structure that small businesses can have within their business. For example, you could be trading under a company, you might have your assets secured in a trust. You may be doing some form of partnership with a friend or a family member. You know, in that example, you have three subscriptions even though, you know, if you looked at the company's information, it would only show as one. You know, it's something that we've seen both in Australia and New Zealand. As we get more penetrated in the market, actually the TAM grows, because we start to be able to look through and see those additional entities that, you know, that do become part of the TAM. We see that the cloud penetration in Australia at the moment is probably, you know, around that sort of 60%-65%. Still a long way to go. If you look at what's happening in the New Zealand market where we have, you know, higher cloud penetration. You know, New Zealand had its largest ever half, you know, in this half. You know, it certainly isn't slowing down, much like Australia had its best ever half, too. You know, it's gonna be really interesting to see where that lands in the future. Our next question is from Tom Beadle of UBS. Please go ahead. Oh, hi, guys. Yeah, just I had a question on the international subscriber growth. Obviously, it's a pretty solid number. It was probably a little bit below expectations, though. I'm just wondering, is there anything to talk to, sort of, you know, any drags to talk to from a macro perspective? I mean, for example, what can you see in your own data on your SME customers in the UK and U.S. and how does that compare to Australia and New Zealand? Thanks. Something that we always need to consider looking at comparing, you know, H1 and H2 is that different countries or different regions do have seasonality. Effectively, you know, you end up in a situation where normally H2 is the stronger half for most regions, apart from Australia, you know, which has the majority of their tax year ends at the end of June. There is certainly seasonality behind it. Also, you know, this has been a market which has had fluctuation and variability. You know, we're pleased with how we've gone in the international segment. We have seen good growth. 23% subscriber growth both in the UK and North America are good solid numbers. As I say, you know, we've also continued to have really strong growth across the ANZ segment. Yeah, I think, Tom, what I'd add also, 'cause you can get access to the Xero Small Business Insights data that we publish that takes anonymized, aggregated data across several hundred thousand small businesses in Australia, New Zealand, and the UK, and sort of draws some conclusions around what's happening with revenue and job sales and jobs growth in those markets. You know, we talk about fluctuating conditions. Well, you know, that is the case. That's what we're seeing. You know, when lockdowns occur, that has an impact, and then when lockdowns end, that also leads to a positive outcome. Overall, you know, it is still, I think, best described outside, you know, in the broader context as fluctuating times and conditions. Our next question is from Quinn Pierson of Credit Suisse. Please go ahead. Hi. Thanks for the time. As I think about your revenue growth outlook from here, ARPU is increasingly featuring, and a lot of these ARPU drivers are at far higher contribution margins than the group, some at 100% contribution margins, things like price rises. Look, you've been clear on your FY 2022 cost guide. I just wonder if looking past FY 2022, if we're finally at a stage where we can be thinking about reinvestment and still being able to handle some margin accretion. I'd love to know your thoughts kind of on FY 2023 and onwards, how to be thinking about the ability to reinvest and still bank some margin expansion. Thanks. Thanks, Quinn. Yeah, I mean, you know, we're very much talking around the first half of FY 2022 today. So I can't really, you know, give you any kind of commentary on FY 2023. I think within that question, you did, you know, include a fair number of different things. We talked around, you know, you talked around ARPU and, you know, we were really pleased to see the ARPU uplift of 5%. As I went through in my script, there are a number of different factors which have driven the increase in that ARPU. You know, the price change that we put through definitely helped and, you know, was very successfully managed across each of our regions that it impacted. We've also seen changes in the product mix. The acquisitions, particularly of Planday, also helped the attach of different ecosystems, but then of course we have FX being a bit of a headwind. You know, overall, ARPU does sort of bounce around at the moment. It's a little bit volatile depending on what's happening within the half. You know, obviously longer term with the product set that we have today, ARPU you know should be on the upward direction. As long as, for example, we don't suddenly get a massive hit on the payroll-only solution or that our that the Starter, the reinvigorated Starter product from last year, you know, those sorts of new products would also have a drag on our ARPU. As far as whether or not you can expect a margin expansion in the future, I think we've been pretty clear around the fact that we see huge opportunity out there globally. We have a strategy that wants to take as much of that opportunity as we possibly can. You know, we very much at the moment are focused on reinvesting that contribution back into the business to take hold of the opportunity that we see ahead of us. Thank you. Our next question is from Bob Chen of JP Morgan. Please go ahead. Good morning, guys. Just a question around the broader M&A strategy going forward. Obviously another small pickup today with Locate. I mean, well, what does that pipeline look like going forward, and how does that tie in with some of the gaps across your current product offering? Maybe even some color on what scale of acquisitions would you be willing to sort of take on as well? Yeah. Well, thanks for the question, Bob. Look, again, it's grounded in strategy, and our strategy really does have two dimensions. One, in terms of executing M&A. Well, actually three. There's driving cloud accounting adoption, there's the building of the platform, in other words, applications and services that extend the usage of Xero, the Xero platform by our customers, and then obviously capabilities that we're building for continued growth. Those three things play into the way we think about this. You know, we have really good idea in the context of our strategy about the application areas, the markets, the needs that are really worthy of consideration and participation. What I would say is there's no fixed formula for what an acquisition might look like other than its suitability to help us in that execution of our strategy. Alignment with our strategy is what we look for. The value it's gonna deliver to a customer is what we look for. The actual size scale is not, in a sense, the driver here. We're very open-minded around that. Okay, great. Thanks, Bob. Our next question is from Garry Sherriff of RBC. Please go ahead. Hi, just a quick follow-up on ARPU. Are you able to just remind us on the ARPU contribution versus Planday, I should say, relative to the core? Can we just get a sense of what the ARPU is from Planday, if possible? Yeah. I mean, within that ARPU, it had, you know, slightly less than NZD 1 impact on the ARPU. Thank you. The last question, just in relation to legislative tailwinds or headwinds. I mean, you did refer to Making Tax Digital being deferred. I mean, are there other material developments in the UK or other major markets on the horizon that you can fill us in on from a timing perspective? Yeah, probably nothing specifically in terms of a deadline or a date, but more to do with certainly the governments continue to encourage in every market digital connections to business. You've got also trends like open banking, which are significant in several markets. You've got e-invoicing, which is another area that's being promoted. I think that there is definitely potential for more government-related support for the digitization of small business as we go forward. Thank you. Our next question is from Roger Samuel of Jefferies. Please go ahead. Oh, hi. Just a follow-up question from me. You mentioned that North America is a key focus for you right now. I'm just wondering why this time is different for you. Why are you confident about your future success in the U.S.? Is it the market structure is different? Is it the competition has sort of backed away from small business segment? Yeah, just curious, why is it a priority for you? Yeah. Look, it's, I think, a bunch of reasons, Roger. I mean, it is a big market, big opportunity. It is underserved at this particular point in time and will be for a while to come yet. You know, we get a lot of encouragement out of being able to add subscribers and also engage and build great relationships with accounting and bookkeeping partners. We know our customers, and credit to Tony and the team that have been leading our go-to-market focus and efforts over the last couple of years. We've got a really good sense now, and our product teams are engaged very closely to understand the specific needs of accountants and bookkeepers and small business customers. Planday, look, we're, you know, again, very pleased with the progress they're making, and the growth in employee users is a real positive there for us. You know, there's still a lot of market available to them, both in the markets they're in, the European markets they're in, but also in the Xero markets that we plan to bring them to. Ask Steve, is that lockdown later as well? Because again, the step up is slightly slower than the June quarter. Yeah. Is that? Sorry, you're talking about which one in that context? The third chart on slide nine. If you look at payment volume. It's increased on June quarter, but actually, the delta is a bit slower than, you know, March to June. Just wondering whether lockdowns had an impact on payment value as well. Look, you know, certainly in the last few months of the half, there was a lot of lockdown activity in New Zealand and Australia that would've had some effects. Again, even in that context, it's still good to see that overall there's growth. The conditions have been fluctuating. I mean, when I said that the last half was challenging for our people, it's because they're experiencing the changing conditions, you know, lockdowns and then opening up again, you know, 'cause we're going back and forward between different environments as well. Our customers and our partners are. Our next question is from Paul Mason of E&P. Please go ahead. Hey, guys. Sorry, this is gonna end up being a two-part question, but there's been a comment about Making Tax Digital being deferred. My understanding is that the next phase of VAT requirements is still coming in in April 2022, and the thing that's been deferred incrementally is income tax from 2023 to 2024. Maybe you can correct me if I'm wrong on that. But presumably I'm right. The second part is maybe if you could give some comments on sort of how the trajectory of this year's sort of feeling in the UK with the regulatory trigger at the end of the year coming versus what the last time felt like in 2019. Yeah, thanks for the question. You are correct. Certainly that sort of second phase of VAT for our businesses that are under the 85,000 threshold hasn't been postponed. It is the next part, the next phase of Making Tax Digital. I mean, there is a large opportunity for us as there was with the first phase. You know, they are smaller businesses, so therefore, you know, it will be interesting to see, you know, how much of that really fits in with the Xero solutions that we have today. But, you know, there certainly is a large opportunity there. I think, information from the HMRC was that in total there was gonna be about 1.1 million opportunity there of businesses who fit within that criteria and, you know, probably sort of close to 400,000 or 500,000 of those only have a Making Tax Digital solution at the moment, which does leave, you know, a fair few that need to work out how they are going to to solve for that connection, you know, within the next sort of half. Okay, thank you. Are you there, moderator? Apologies. If you have any further questions, please contact the Xero investor relations team. If you're a media representative, please reach out to Xero's corporate communications team. Mr. Vamos, back to you for closing comments. Thank you very much, Ari, our moderator, and thank you to all of you for taking the time to join us today, for your questions and for your ongoing interest in Xero. We really, really appreciate it, and you know our team are ready to connect at when that suits you. Thank you very much and we appreciate you all. Look after yourselves and thanks for attending. Thank you. That concludes today's call. Thank you for joining. You may now disconnect your lines.