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 Sukhinder 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 and 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 H1 fiscal 26-year results, which clearly demonstrate 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, enables us to again deliver above the rule of 40, demonstrating strong cash generation.
I'm going to touch on a few metrics here, and Claire will cover them in detail later in the presentation. Operating revenue grew 20% year on year to reach NZD 1,194,000,000, or 18% in constant currency. This strong growth comes despite a tough prior period comparison. Adjusted EBITDA was NZD 351,000,000, 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 U.K., and the U.S., 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 17% 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 backbook of existing customers is a longer-term opportunity. New Zealand delivered quality growth in what is our most deeply 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 ANZ 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 U.K., 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 U.K., we delivered robust performance with 25% revenue growth. Subscriber growth remained strong at 13%. We saw early indications of tailwinds related to HMRC's 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 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 Rule of 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 middle chart. Adding this to revenue growth, where we use 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 Melio 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, Sukhinder, 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 Sukhinder said, our results show sustained revenue momentum across our portfolio 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 a tougher prior period comparison, 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. ARPU growth was 15% on a reported basis, noting that our ARPU disclosures are based on the end-of-period foreign exchange rates.
On a constant currency basis, ARPU growth was 8%. The continued balanced growth in both subscribers and ARPU drives our AMRR, which I'll talk about on the next slide. AMRR reached $2.7 billion. This represents a 26% year-over-year growth or 19% in constant currency. AMRR, like ARPU, is calculated using end-of-period foreign exchange rates. The AMRR 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 2026 revenue. We saw both impact our revenue growth in the first half relative to AMRR growth. We are continuing to deliver very healthy gross profit, with gross profit margins of 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% ARPU growth in the first half, which you can see on slide 12.
Price changes reflect monetization of the significant value we have added to Xero through new features and capability improvements. Price increases typically happen in the first half of the year for Australia, New Zealand, and U.K. regions, so we expect pricing to contribute more significantly to ARPU 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 go-to-market strategy, with new customer mix incrementally improving in the U.K. and U.S. 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 shift towards these plans.
While overall we have made progress on our new customer mix, as Sukhinder mentioned, backbook progress remained 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 ARPU 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 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 Xero Payroll increased 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 U.S., 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 ARPU 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 our acquisition metrics, customer acquisition cost 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 ANZ 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 2026 outlook and now expect the full-year ratio to be around 70.5%. Within this, we've added value, 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 proportion 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 revenue. 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 Xerocon Brisbane. General and administrative 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 27. Moving down to the bottom line, our sustained revenue growth and disciplined capital allocation delivered an adjusted EBITDA of NZD 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 NZD 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 NZD 25 million increase in net interest received, reflecting the higher cash balances held prior to completion of Melio 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 prepayments. 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. Our strong cash generation further strengthened the balance sheet. We ended the half with a net cash position of NZD 3.2 billion, supported by the net funds raised for the Melio acquisition. Following the completion of the Melio acquisition, our pro forma balance sheet showed a net debt position of approximately NZD 0.5 billion, with a pro forma net debt to EBITDA of approximately 0.9 x. 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 2026.
This change in our balance sheet position will create a headwind to 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 2026 compared to the same period last year. The disclosure here is intended to help with the understanding of the combined business on a like-for-like basis. We won't be providing separate performance metrics for Melio going forward. Its revenue contribution will form part of the new U.S. region, of which you can find more details in the appendix.
In the first half of fiscal 2026, underlying Melio revenue growth reached 68%, driven by the addition of around 7,000 new customers since the second half of fiscal 2025 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 gross margin has been broadly consistent with fiscal 2025. 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 Melio 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 Melio's management earnout and incentive plans will add about $10 million in operating expenses in the second half of fiscal 2026, 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 Sukhinder.
Thanks, Claire. I'll now talk to our FY 2025 to 2027 strategy and update you on a few recent moves we've made. As you know, our vision and purpose are constants 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 3 by 3, build a winning GTM playbook for Xero's next chapter, win the future, which is about focus best in innovation, and lastly, unleash Xero and Xeros to win. These four pillars are underpinned by our disciplined 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 continued our strong product delivery momentum through working hard to build product ourselves, but also through partnerships and our acquisition of Melio, 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 U.K., and the U.S., 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 Syft across the U.S., U.K., 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 for our embedded payroll solution through our partnership with Gusto to provide U.S. payroll capabilities. Secondly, we've implemented a series of changes to strengthen our go-to-market playbook.
A core focus has been increasing the sophistication of our sales motions to improve mix. 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 to the 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 super agent. 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.
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's to win. We're empowering all Xero's 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 workflows, 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 Xero's. 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, JAX, Just Ask Xero. JAX is built on Xero's AI agentic 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 JAX help our customers interact with Xero seamlessly.
The goal is to have JAX help our customers interact with Xero seamlessly. We're leveraging AI to reimagine the Xero experience. 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 surpasses AI that relies solely on large language models. This ensures greater reliability and confidence in the output.
To summarize, we told you at our last result, we have an ambitious AI agenda in FY 2026, 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 in turn further inform our approach to monetization. I'm excited to dive into the next steps for integrating Melio, 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 and create efficiencies, improve their cash flow, and importantly, save some time. This is reflected in the significant TAM for U.S. SMB 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. As many of you have already met Matan. The quality he and his team bring to Xero is significant, and this is demonstrated in the exceptional growth and strength of Melio offering. 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 and U.S. penetration uplift our scale in the U.S. business from day one, with much improved unit economics and a larger and secure 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 with a seamless and powerful bill payment solution directly within the Xero platform. It will give Xero customers access to Melio's payment functionality to 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 FY 2026 outlook. As Claire said, we've lowered our OpEx guidance and now expect total operating expenses as a percentage of revenue to be around 70.5% in FY 2026. 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 Melio 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 FY 2025 group revenue base in FY 2028. 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 FY 2028, 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 3 by 3 portfolio, continuing to deliver a greater than Rule of 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 Barrenjoey. Please go ahead.
Hey, good morning, Sukhinder 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 adjusted EBIT, adjusted EBIT downgrade versus consensus. I just wanted to check whether the actual operational EBITDA hit and actually maybe an even top-line upgrade. And so if you just bear with me on the logic, if I look at your revenues and your AMRR, 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 D&A out of it for a second, you've actually lowered your core cost to sales, which offsets growth and 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, sell side, including myself, is kind of bad at modeling amortization and purchase price amortization 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 we're really pleased with the strong execution that we've seen in H1. To your point, really strong top-line growth is coming from the Xero standalone business and then a lot of momentum as we move into the second half. 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. Then that really strong Melio growth that we reported puts those together for the second half. We're really excited about the growth opportunity, not just for the second half, but also in the medium to longer term. 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 you 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 a Xerocon event. We've published, as Sukhinder suggested in her prepared remark, we've been publishing a lot of new product features and great product philosophy. 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 improvement from an overall EBITDA.
I understand, 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 Melio.
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 variants, just a rough framework for how we should all think about FY 2027. I guess if you use your cost-to-sales guidance for FY 2026, it's pretty easy to get to an EBIT number. And if you add some DNA back, you're kind of in the 740-750 EBITDA range for FY 2026. And then you've told us that $45 million comp impact falls out next year.
Then obviously you get operating leverage on any revenue growth that you deliver as well. I mean, it seems like a fairly obvious question, but FY 2027 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 2027. 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're continuing to invest in profitable 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 Xero 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 JP 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 Edition. I mean, when we think about subscriber growth from here, because of that shift towards focusing on Business Edition, you get that sort of higher 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 Sukhinder. 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, historically our partner channel has lower churn, and direct, as we allocate to it, has higher RPU, 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. It was coupled with our long idle removal. And it really speaks to we're always going to be keeping an eye on the quality of the sub and obviously continue to want to 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're obviously seeing RPU 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 RPU. 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 RPU.
It's about having a big performance funnel where you're inviting a lot of prospects into the product, and then you will see an increase when you do that, have that direct paid motion for direct customers. You tend to see higher churn in the first 90 days as an example. As more people looking to lose is not quite the right example, but they're really just trying the product. It's like I said, I think it's more a function of that than ARPU specifically.
Great. Thanks, Sukhinder.
Thank you. The next question comes from Gary Sherriff from Royal Bank of Canada . Please go ahead.
Hi, Sukhinder 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 Xerocon revenue. 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 Xerocon revenue that you're cycling?
Sure. I think there's three things. First of all, you were right. If you back out Xerocon, 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 Xerocon. Canada remains subdued. I think we continue to say that. Now, you will have seen in this, 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 momentum driver in the market. But today, I'd say the move to cloud has been really suffering from lack of open banking.
Then the third piece is, remember, H1 is seasonally a weak 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, back out Xerocon, U.S. alone is about 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 an organic like-for-like growth for Melio. Maybe you've already reported it. 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 2026, you can see that on an underlying basis, that is increasing. So we have adjusted 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 over half, both in the number of customers, in the TPV per customers, in the takeaway. 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 Hannan 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 is it more the 33% standalone U.S. growth that you did in 1H?
Yeah, I think if you look at the additional disclosures, because you can now see U.S. broken out separately, and you see that kind of in our appendix slide, you can see that the Melio growth in the first half is more than double our Xero 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 pro forma numbers in H1 . And all of our announcements, Kane, for a lot to make a finer point on it. When we said significantly accelerate, remember, we were comparing to Xero standalone at the point of announcement, right? So.
Yep, that's helpful. And then just the comments on Melio's GP margin sort of being flat, but calling out the drivers expansion being firmly in place. I mean, does that mean we should be thinking about margin expansion in the second half? Or sort of what are we waiting for, looking 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 Melio. You've got the benefit of scale and the additional margin dollars that come through. And clearly, when you've got a growth rate of 68%, there's a big opportunity there. And then there is the areas with regards to the margin expansions.
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 the aspirations that we laid out and getting above the Rule of 40 on a combined business in fiscal 2028.
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's closest 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, Melio does not entirely control when partners deploy. This is why we have a lot of confidence over the medium term and the guidance, not the guidance, the aspiration that we gave for 2028. But I would remind you that partner syndication timing is not entirely Melio's 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?
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 included 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 Workpapers. So we're going to continue to also drive, 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 Melio. So if I back out Xero standalone, looks like we have incurred losses of about $56 million in the first half of 2026 on a pro forma basis. That's lower than minus $60 million in the PCP. So I suppose the question is, when do you expect Melio to be break-even? I mean, if you look at the guidance, which is year to reaching Rule of 40, you're pretty close to that Rule of 40 already as a combined business, plus or minus the adjustments to interest, expense, and the earn-out. So yeah, so yes, I just wonder when you can expect Melio to get Melio business to be break-even.
Yeah, I'll take that. So first of all, to your point, we did have a great combined Rule of 40 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 getting those go-to-market opportunities running, whether it's the product announcements and the Melio 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 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 Sundram from MST Financial. Please go ahead.
Thank you. Hi, Sukhinder and Claire. Just a 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, I'd say we see continued good demand, strong demand for the Xero product.
I think when we look out to indicators like XSBI, which 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 XSBI 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. So from what we can tell on the macro, there are some signs that Australia and New Zealand sentiment is getting better among SBs when we look at their real-time sales data in XSBI. U.S. Optimism remains strong despite uncertainty, and as I said, U.K. holding steady.
Thanks, Sukhinder. Thank you.
The next question comes from Nick Basile from CLSA. Please go ahead.
Morning, team. Just the first question on Melio. I just want to clarify, I think one of the points that Sukhinder 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 Melio's performance in recent months relative to your longer-term targets to double revenue? I guess just one confirmation that 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 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 performed 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 2025 revenue in fiscal 28, excluding synergies, and back above the Rule of 40 by fiscal 2028.
Yep. 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. But the second question.
You're right.
On operating leverage in the core business, kind of if you think about it while we still can, excluding Melio, the guidance feels like the ability to provide lower OpEx to 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 2026 guidance kind of relates to the 2028 sort of three-year glide path to maintaining Rule of 40 while you're embedding Melio, 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 Xero 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 17.5%. 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.
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. 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. That's our philosophy. Now we're executing against that, and we'll continue to focus on that as we move forward.
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, this is Sukhinder, driving the 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 being clear on the allocation of capital. When we think about fixed costs, our fixed cost base, we want to be clear that 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 customers will value. So I'd say it's about being very kind of, I'd say, while we will 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 a very clear way that we think about driving increases in our cost base.
Number two is it's very, very early days for AI internally, but I would say we are encouraging productivity usage by our employees to really get 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. I would say Xero's adoption of AI, whether that's in P&T or sales and marketing, where they're creating more assets using AI, or the average Xero who's using things like Gemini, and I'd say improve their mastery of their work and save time. I'd say that is like 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 how are we creating operating leverage. So we want to always come back to what's the use of those efficiencies for us? It's the ability to reinvest in the highest revenue growth opportunities and customer value opportunities. But that's sort of where the efficiencies are coming from, for lack of a better word.
Okay. Very clear. Thank you.
Thank you. The next question comes from Siraj Ahmed from Citigroup. Please go ahead.
Morning, Sukhinder. Claire, can you hear me okay?
Yep. We can hear you fine.
Yeah, that's fine.
Yeah. So just a question on Melio. Sukhinder, just a comment on the indicator part. It does have a bit of something that's slowing there from that whole rollout of Cash Flow Central. And just a second part on Melio. I mean, can you give us a view on Melio's revenue at the end of the half, just to look at second-half revenue and whether some of the Cash Flow Central revenues is coming through in the second half, right?
So Siraj, you broke up for quite a while there. I think you were asking about Cash Flow Central and Fiserv's rollout. Is that correct?
Yeah. So just, sorry, my network's not great. Just in terms of you sort of said syndicate partners are not within your control. I'm just wondering whether something's slowed with Fiserv.
Got it. Yeah.
And Melio is within your.
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 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, it is, 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. When somebody said, "Well, what are we waiting for?" I'm like, "Well, you could be waiting for a partner to deploy 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 Evans & Partners. Please go ahead.
I had maybe a follow-on to Siraj's question there. Are you able to provide any color on sort of how many banks Fiserv has been able to convert across so far? Was my follow-up. And then I was hoping you guys could comment a bit on thoughts around AI monetization, 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 monetizing AI this year explicitly. I think we think the pricing models are still early. We're seeing 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 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 backbook. 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 backbook, 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.
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 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 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 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.
When we say it's more complex, we're giving our sales teams training on Syft. Syft just rolled out in all of our products. So now our sales teams are learning the different Syft features available at different levels of plans. And reminder, then you need to go to your backbook 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 backbook to even identify who's eligible for upgrade. 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. These are the kinds and that's just on Syft. Then you think about payments. In the U.S., you think about Melio.
So when we say sophisticated motions in the backbook, we mean it's often a combination of segmentation, orchestration, digital marketing, physical marketing, sales training, sales education, sales incentives. Now you get a hopefully a picture of why we say the backbook is a set of more sophisticated motions and orchestrations that unlocks 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 backbook mix, but if I think about the significance of the Melio launch in December, you've got the Gusto beta going live soon, 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 modeling 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 our ARPU. And in the U.S., which actually has the smallest backbook, right, just by virtue of its size, you're playing as much to win the next customer as sell through the backbook.
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 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, Sukhinder and Claire. I've got two questions. So sorry, another one on Melio. You guys mentioned that Melio 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 changing go-to-market strategy with Melio and Xero in the U.S. come end of this year? Do you think there'll 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 we noted Gusto's beta. So our first job is get customers on the product, make sure they're happy with it. 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 a customer only wants Melio, that is another synergy opportunity. So I'd note first and foremost, the integration opportunities in performance marketing and in the AB 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 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 2027 that we're looking at. And I think if you put those two together, we're excited.
Yeah. No, that's really key. And then just one last one for me. I think you mentioned I made a comment around having to include payroll into Australia, into the lower-end plans, and we saw a bit of churn from customers. Just wondering whether there's been a change or how you're thinking about product mix being a bigger driver of ARPU 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 reinclude payroll and our lower plans. That was really a reflection of us taking in customer feedback and people saying, "Okay, 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 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 backbook. So this is a place where it will be very much those sophisticated motions we talked about across both Syft 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. Yeah.
In terms of ARPU growth in Australia, so this year without the bottom plan, I think price rises. Where would the growth come from? Or what's the reason?
Yeah. 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 backbook, any mixed improvements. It would be a function of payments attach. Remember, we have a big invoicing business where we are attaching payments also to invoice volume. And that business grew last year. This year grew 30. I don't have the numbers handy. Somebody remind me what it grew this more. 30? 35%. Sorry, guys. I was just grappling for the numbers in the deck among all the numbers we have.
So remember, we also have payments attached to our invoicing payments in that number. So those are all the contributors that are. And then we have currency effect, obviously, at the group level, also creating some ARPU movement. So
That's wonderful. Thank you so much.
Thank you. The next question comes from Sriharsh Singh from Bank of America. Please go ahead.
Yes, again, Claire. Thank you. I've got two questions. One, just following up on the Xero and Melio integration timelines, I'm 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 Syft analytics integration, which you've just done and rolled out.
And second question, the latest round of pricing updates was really interesting. You kept pricing flat for the lower-end subscription plans. However, the higher-end plans have gone up 11%-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 funnel 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 Melio 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 Melio announcement about the opportunity to also, if appropriate, embed Xero in the Melio 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 Melio's customers would want embedded accounting. Some of them might just want bill pay. Some of them might be happy to do a referral deal, and some of them might want to have accounting in their stack. So we always talked about that as experimental and upside. And that's the same way we've talked about the Bluevine 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 that's, I think, 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 moved in the last several years from 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 made 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.
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 Xero 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 we have now multiple levels of Syft functionality across our plans. I mean, these are products that if you were to buy them standalone 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. They ask us for things like transaction limits or permissions or multi-entity reporting. By the way, multi-entity reporting is within Syft. 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 color.
Thank you. That does conclude the Q&A session. I'll hand the conference back to Sukhinder 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.
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