• Xero's AI strategy to deliver customer value through automated actions, actionable insights, reimagined experiences, and as a trusted partner
• Xero's acquisition of Melio accelerates US growth and delivers stronger unit economics
• Xero outlines plans to monetize AI and payments in line with principles of driving usage/adoption and deepening AI value

Xero's CEO Sukhinder Singh Cassidy and executive team outlined the company's AI strategy and the strategic rationale for its acquisition of payments platform Melio. The AI opportunity is described as immense, with the potential to expand Xero's total addressable market by around 4x. Xero's AI strategy is focused on delivering customer value through automated actions, actionable insights, reimagined experiences, and positioning Xero as a trusted partner. The company has clear proof points of the customer value being delivered, including 97% of help sessions being resolved without a ticket, a 12% increase in messages per user, and 61% of eligible subscribers using AI insights. Xero plans to further expand its AI capabilities, with multiple new agents across core jobs-to-be-done in accounting, payments, and payroll. The company also outlined its principles for monetizing AI, focusing on simplicity, driving adoption, and providing future optionality. Regarding the Melio acquisition, Xero highlighted the strategic fit, Melio's world-class team and platform, and the compelling value creation potential. The acquisition is expected to deliver a step-change in Xero's US proposition and scale, with the combined unit economics providing the runway to accelerate growth in the US market.

Xero provided the following forward-looking financial metrics for its combined US business with Melio:- Total US revenue is expected to grow 38% year-over-year in FY25, comprising 28% growth in subscription, invoicing and other revenue, and 42% growth in payments revenue.- Total Xero BillPay payments transaction volume (TPV) is expected to grow 67% year-over-year in FY25, with the gross take rate increasing by 2 basis points to 0.50%.- US gross profit dollars are expected to grow 21% year-over-year in FY25, with the US gross margin declining by 5 percentage points to 38%.

Xero outlined multiple ways to drive growth in payments transaction volume (TPV), including customer education to drive feature adoption, product improvements to capture more TPV, and organic growth as customers realize more value and their bill sizes grow. The company also highlighted its ability to influence the mix of payment methods used, which can drive higher-value transactions and profitability.