First Read: Xero "Capturing missed opportunity" (Buy) Huang

Research evidence excerpt

First Read: Xero "Capturing missed opportunity" (Buy) Huang

typically get pressured to 03/26E 1.41 1.43

move to incumbent ERP because of lack of awareness on how to build a strong 03/27E 1.48 1.49

app ecosystem around XRO to adapt to mid-market complexities. 03/28E 2.38 2.47

XRO currently in beta for a mid-market product, with enhanced Lucy Huang

functionalities such as granular user permissioning, bundling of Syft Analytics, Analyst

improving inventory capabilities for companies that are goods-based. Currently 20 lucy.huang@ubs.com

customers in trial. We see potential for a Mid market tier from XRO to drive further +61-2-9324 2253

ARPU upgrade path for customers as they grow; Ailsa Lei

Analyst

Mid-market tech focus areas. Beyond simplification of current tech stacks

ailsa.lei@ubs.com

(industry feedback suggests anywhere between 15-100 apps are being used by +61-2-9324 3181

companies with at least 50% dormant and can be eliminated), focus areas include

more automation, visualisation and better reporting, and focusing on MCP

layer (AI agent automation/orchestration).

XRO reports 2H26 results tomorrow

We remain positive heading into XRO's results tomorrow. We expect 2H26e Rev

$1.52bn, EBITDA $395m, FCF (XRO defined) $322m, EBITDA-capex $183m, Group subs

4,869m.

Valuation: $127/sh PT unchanged

Highlights (NZ$m) 03/23 03/24 03/25 03/26E 03/27E 03/28E 03/29E 03/30E

Revenues 1,400 1,714 2,103 2,717 3,593 4,285 5,028 5,840

EBIT (UBS) (60) 240 356 387 428 647 930 1,289

Net earnings (UBS) (114) 175 228 228 252 404 620 901

EPS (UBS, diluted) (NZ$) (0.75) 1.14 1.47 1.41 1.48 2.38 3.65 5.30

DPS (net) (NZ$) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net (debt) / cash 60 378 1,039 (545) 102 995 2,263 3,923

Profitability/valuation 03/23 03/24 03/25 03/26E 03/27E 03/28E 03/29E 03/30E