Kia ora. Good morning from Auckland, New Zealand, and welcome to Xero's 2023 annual meeting. I'm David Thodey, and I'm the chair of the Xero board. Thank you for attending today's meeting. I'm here with the board, broadcasting from our Auckland office. Now, we've tried to design the procedures for this virtual meeting in a way that allows you the same opportunity to participate today as you would at a physical meeting. This includes being able to ask questions and vote using an electronic voting card. Now, I'll discuss this process shortly, but I would encourage you to download and refer to the online portal guide from the Download section at the bottom of your screen, or from Xero's website if you haven't already done so.
In the unlikely event that we experience technical issues that impact the meeting, I, I'll assess the circumstances and communicate further with you. If this isn't possible, you will be emailed instructions on how and when to rejoin the meeting. I'm informed by our Company Secretary that in accordance with the company's constitution and for the purposes of each resolution, a quorum is present, and I now declare the meeting formally open. I'd like to start the meeting by introducing the board, and joining me from Auckland are our directors, Stephen Aldrich, Lee Hatton, Rod Drury, Susan Peterson, Mark Cross, Anjali Joshi, Brian McAndrews, and Dale Murray. From Xero's leadership team, we have our Chief Executive Officer, Sukhinder Singh Cassidy, our Chief Financial Officer, Kirsty Godfrey-Billy, and on my right, Damien Coleman.
We are also joined by our other members of Xero's leadership team and other Xero colleagues. Simon O'Connor and David Borrie from our auditors, Ernst & Young, are also present and available to answer any relevant questions directed to them. Xero's General Manager of Corporate Communications, Kate McLaughlin, will read out written questions submitted by shareholders during the meeting. With that behind us, I'd now like to turn to the agenda and the order of events for today. Firstly, I'm going to say a few words, and we will hear from our CEO, Sukhinder Singh Cassidy. We'll turn to the formal business of the meeting, and we have five resolutions today. After that, there will be an opportunity for any general shareholder questions before I close the meeting.
Now, before giving my address, I do want to go through a little bit about using this online platform. Voting on the resolutions will be conducted by poll, and that poll is now open. Please vote by using electronic voting card you should receive after checking the Get a Voting Card button. Shareholders can submit written questions during the meeting by clicking on the Ask a Question button, and I encourage shareholders who have questions to submit them as soon as possible, including if you have questions about any of the resolutions. If you have any issues at all using the platform, please check the online portal guide, which you can access through that Download section at the bottom of your screen, or from Xero's website, or again, contact the phone helpline shown on this slide. Shareholders can also ask questions by telephone.
To use this telephone, teleconference facility, shareholders must use their, you know, PIN, PIN number, personal identification number, provided to them by Link Market Services. When you dial in, you will be asked to mute your sound, listen to the meeting by the phone, and if you wish to ask a question, you will need to dial star one on your keypad, and this will indicate to the moderator that you wish to ask a question. The teleconference moderator will require your name, and at the relevant time, will introduce you and prompt you to ask your question by unmuting your line. With that administration behind us, I'd now like to move on to my address. In 2023, we completed one of our key responsibilities as your board, and that is the appointment of a new CEO.
We are immensely pleased with the appointment of Sukhinder as our new CEO, following a rigorous global recruitment process, during which we considered a number of exceptional candidates. We are excited to have someone with Sukhinder's expertise leading Xero. Her broad experience across different organizations, role types, and geographies within the tech sector, and in particular, building product and scaling go-to-market businesses, will benefit Xero in its next stage of growth. In working with Sukhinder over the past six months as CEO, she has demonstrated her purpose-driven and human-centered leadership through supporting our customers and her commitment to growing and evolving Xero's unique culture. I'd also like to take a moment to acknowledge and thank Steve Vamos for his work in developing Xero as a global business and for the support he provided through the transition period.
His enormous contribution to Xero has been invaluable, and I, like the, along with the rest of the board, thank him for his time with us. I'd now like to move on to our performance in 2023. Sukhinder will speak to the details of our 23 financial year results. I want to highlight the decisions we have made in this higher interest rate environment and with our increased focus on operating efficiency. We have taken action to streamline our business. We also revalued our recent acquisitions, reflecting the current valuation backdrop and the operating performance of these businesses. While this negatively impact our full year 23 EBITDA results, these decisions support our aspiration to become a higher performing global SaaS company and generate disciplined growth as we continue to support our customers. It has been another year of change and adaptation around the world.
You know, businesses, governments, economies, workplaces, and our communities continue to face a complex macroeconomic environment. Within this environment, we continue to see small businesses, our customers, being the employment engine room of economies, and their resilience remains incredibly strong. Xero's purpose is to make life better for people in small business, their advisors, and communities around the world as they operate against this complex macroeconomic backdrop, and this can be seen in our performance this year. We now have 3.7 million subscribers around the world, and churn remains low at 0.9% each year. The underlying market opportunity for our products remains large as we continue to support small businesses to unlock the incredible productivity benefits that comes from shifting to a digital economy.
Governments in many parts of the world are encouraging the digitization of small businesses, and we continue to work with governments and regulators to enable this transition. We believe that Xero is well positioned to capitalize on this fundamental trend of small businesses moving to the cloud, and in doing so, to generate value for all of our stakeholders. Now, a critical part of this is building and maintaining trust, which is at the heart of our business and underpins many, the many ways we create long-term value for our stakeholders. We must use data responsibly, and we must ensure we have a robust cybersecurity frameworks, is so critical in earning and maintaining our customers' trust. We recognize that we must be vigilant in protecting our customers' data.
We take a multi-layered and risk-based approach to managing security through the use of, you know, really advanced technology, you know, a robust security management process and working to keep security considerations front of mind for all of our people. We also have a comprehensive cyber strategy in place, which is regularly reviewed and is also updated in the event of material changes to either internal or the external environment. Of course, external threat level changes is critically important to monitor, you know, significant changes in business direction and heightened legislative and regulatory requirements are all things that we take into account. I do want to stress, we are vigilant in our focus on continuously improving our approach to security, given this constantly changing nature of the external threat landscape, and regularly introducing new capabilities and processes and enhancements that further strengthen our security posture.
Protecting our customers' data is absolutely fundamental to this company. We also must grow in a sustainable way, and that is an important consideration within our strategy, and it's integral to who we are as a company. We continue to evolve our approach to sustainability in order to meet the expectations of our stakeholders. On climate, we've continued to add further disclosures aligned to the Task Force on Climate-related Financial Disclosures, or TCFD. We're also very mindful of recent and proposed changes to sustainability accounting standards with the ISSB standards being published. While we believe Xero's reporting is well positioned as we progress towards this, we continue to monitor proposals. All businesses will be impacted by these changes, and this will present a significant change for many. It requires a whole of organizational uplift in the quality and robustness of disclosures.
There is also an opportunity for us at Xero to help small businesses position themselves for this change. By working with partners across our ecosystem, we can help small businesses use the data in Xero to measure and report their own carbon footprint. As businesses improve their data and quantification of emissions, there will be opportunities to make more informed decisions about the true carbon cost to a business, both directly and throughout their value chain. I'd now like to turn to the board. We, as a board, are committed to continuous improvement in our approach to corporate governance. The board recognizes the importance of continual review of our governance practices and performance, as well as the mix of skills and experience represented on the board, and how it enables the board to fulfill its role in leading a global SaaS business.
This year, in reviewing its governance practices and performance, the board identified actions to support its focus on being a consistently high-performing board.... These included actions relating to setting up and supporting our new CEO, Sukhinder, for success as she came into the company, continuing to refine the board operating rhythm and ongoing board succession planning and capability, which I will speak to in a minute. Before I do that, I do want to acknowledge Mark Cross and Susan Peterson for their immense work in chairing the Audit and Risk Management Committee for Mark and the People and Remuneration Committee for Susan. These two committees play such an important role in our governance structure. Let me turn to the board's renewal and succession planning, and there have been a few changes announced to the board since our last meeting.
I'd like to start with a couple of sad departures for us. After serving on the board for 9 years, Lee Hatton is retiring from the board at the conclusion of this meeting. On behalf of the board, I want to thank Lee for her valuable insights and significant contribution over that time. Including, she was chair of the Audit and Risk Management Committee from 2017- 2020. What I'd like to do now is just to hand over to Lee, just to say a few words. Lee, over to you.
Thank you so much, David. It has been a privilege to have been part of the board that's overseen Xero's growth and development for the past nine years. I genuinely believe that I leave the board and leadership team in such a strong position to continue to deliver on Xero's purpose, and I really look forward to watching Xero grow and watch its continued success. Back to you, David.
Yeah. Thank you, Lee, and thank you for all that you've contributed to this company. Now, now to the second one, and probably needs little introduction, but after founding Xero, Rod, in 2006, you know, he has been just the mainstay of this business. He served as executive director for 12 years and as a non-executive director for 5. Rod Drury will also be stepping down from the board at the conclusion of this meeting, and, you know, he really has founded and built an incredible global company with a clear vision and purpose that has digitally disrupted an entire industry. I'd like to now pass to Rod to say a few words, which he is not, you know, he's pretty good at saying a few words, to be quite honest.
Let me pass over to Rod, 'cause we want to take this opportunity to really recognize him. Rod, over to you.
Thanks very much, David. It's obviously, you know, a big deal when a founder leaves the board, so I think it's appropriate just to speak to a few things. When I left five years ago, we talked about the company, and I thought it'd be interesting just to reflect on what we've done as a board over that time. You know, we listed as a public company, and essentially as a startup. Through the last 17 years, we've raised an enormous amount of capital. We're on our third CEO and very orderly transitions. We've built a truly global team.
We have great culture in the business and on the board, and it's gonna be really sad having the camaraderie of the board and the numerous board members we've had over this period of time. This is a really hardworking board, I think that's because we were, we were one of the, you know, really first tech growth companies in New Zealand and then in the Australasian market, and balancing all of that ASX governance work with building a global tech company is a huge amount of work. Fortunately, we don't give out gold watches when we leave. We give out these golden T-shirts, which Lee and I have. In that time, apparently I've done 170 board meetings. It's a lot.
There's a huge amount of travel, a huge amount of calls at all hours of the day and night. So it's time. It's been an incredibly long time. To put that in human terms, my second daughter, my first girl, was born when we started Xero in 2006, and she's now in her final year of school and starting university next year. So pretty much for most of my adult life, I've been on the board of Xero, and over the last few years, we've been working on transition, and we have some great product people who can pick up that role and are great at the governance aspects of the business.
To me, I'm just so excited about where we're at, having a fantastic new CEO that's come into the business, and the talent that Sukhinder is putting in the business means we really are at a point where we can build this amazing global platform. Talking with David, the best way that I can contribute in a sustainable way is working with this new leadership team, connecting them back to the early vision we've had, remembering some of the things and the strategies we've worked with, coaching them, and helping this new group of talent do the best work of their lives. Still involved, still a shareholder, really excited about all the things we're doing, and just like we always say, it just feels like it's just the beginning. There's so much to play for. Thank you, David.
Well, thanks, Rod. I mean, it's. We're gonna miss you, quite honestly, but we're just so grateful for your enormous contribution, and we are really delighted that you will continue on as an advisor to Xero, supporting Sukhinder and the team for at least a couple of years. Thank you, and, you know, we'll miss your contributions at the board meetings. Right, let's move to the additions to the board. We continue to focus on how best to enable Xero to scale internationally while maintaining our focus on delivering great products and, you know, outstanding customer service. To that end, we're really pleased to welcome Anjali Joshi as an independent non-executive director who joined the board on the third of July, 2023, this year.
Anjali brings, extensive public company and technology experience, and particularly in product development, and will ensure that the board will continue to have strong skills in this area, and you'll be hearing from Anjali later in the meeting. Anjali's appointment demonstrate our commitment to ensure that the board continues to bring the right mix of skills and experience to help realize Xero's significant long-term opportunity to be a global SaaS business. In conclusion, we're pleased with our performance in the year. As we prepare for Xero's next chapter, the board continues to work very closely with Sukhinder and the leadership team to help deliver our vision, our purpose, and drive disciplined, customer-focused, profitable growth. Finally, on behalf of the board, I'd like to thank Sukhinder and the Xero leadership team for another year of strong performance.
We are also immensely grateful for the incredible dedication and passion shown daily by all Xero's people in what has been a period of change for them and our organization. Our people are absolutely fundamental to Xero's success, and we continue to support them to do the best work of their lives. I'd also like to thank you, our shareholders, for your ongoing support. That brings me to the end of my address, and it gives me great pleasure now to hand over to Sukhinder, before we commence the formal business of the day. Sukhinder, over to you.
Thanks, David. Hello, everyone. It's great to be joining you for our annual meeting today, and my first. I'm going to summarize Xero's financial year results for 2023 and themes, as well as briefly discussing the key observations from my time in the seat so far as CEO. To finish, I'll touch on Xero's full year 2024 outlook. Our performance in full year 2023 reinforces the strength of Xero's fundamental business, and as I always say, it's one of the reasons I'm so excited to be here. It is a great business that has strong momentum, a huge global TAM, and a very unique culture. I want to highlight three key themes from our full year 2023 performance. First off, we are a macro-resilient business that is generating strong growth. Secondly, more customers than ever are subscribers to Xero, and they're staying with us for longer.
Thirdly, we are growing with efficiency as a company for the benefit of all our customers and all the stakeholders we serve. Turning to the details of our full year 2023 results, which we announced in May, I'll share the following. As I noted, we are a macro-resilient business that continues to deliver strong top-line growth. Revenue rose 28%, or 25% on a constant currency basis. This was generated both through net subscriber additions of about 470,000, or 14% growth, with total subscribers at the end of the year of about 3.74 million. Happily, our ARPU also grew strongly, up 10% or 8% on a constant currency basis. Headline EBITDA of AUD 158.4 million was impacted by non-cash impairments.
David talked a little bit about this, and we'll talk a bit more about it, and restructuring costs, resulting in a 26% reduction. However, if you back out the items, that were one time, that gives us an adjusted EBITDA of AUD 302 million, up 45%. The strong operating result drove free cash flow generation, with free cash flow increasing to AUD 102.3 million. In calendar year 2022, we became increasingly focused on managing our cost base. Through more disciplined management of our headcount and other costs, we met our full year 2023 operating expense to revenue guidance with a ratio of 80.7%, excluding restructuring charges. This operating leverage improvement drove an increase in our operating income margin to 6.6%, once again, excluding restructuring charges.
We have completed the restructuring that I announced in March and are well placed to be more efficient and effective in delivering for customers. This has come with a lot of change for our people, and we will continue to focus on Xero's culture and provide support as we learn and adapt to a new operating rhythm. In full year 2024, we are targeting an operating expense to revenue ratio of around 75%. This will improve our operating income margin compared to full year 2023. We will continue to focus on managing our resources better to help support operating income growth and free cash flow. I want to reiterate the views I shared at our full year 2023 results on a few areas of our business and performance, namely North America, Planday, and modernization. Starting with North America.
While we delivered good results for full year 2023, we're not satisfied with the size of our current business against the market opportunity. We remain confident that this is a critical SMB market for both SMBs and their advisors, and that Xero is providing value to our customers. One of my tasks in the coming months is forming a much deeper and more nuanced view of our North American strategy and execution. In the meantime, we will continue to be measured in our approach, and I hope to come back to the market in November with an update. Now on to Planday.
Whilst the impairment in full year 2023 was disappointing, I am and we are excited about the appointment of our new CEO, David Lee, and our greater focus on the small business segment within Planday, both in Planday's home markets as well as through our Australian product launch. We see this as a great opportunity, given that small businesses continue to tell us that managing employees, including payroll and scheduling, are core jobs to be done for them. Finally, on to modernization. There has been considerable focus on the rate and size of our product and technology investment at Xero. As you'd expect for a company our age, certain parts of our code base have higher run costs than we would expect for a similarly performing SaaS business built on today's developer tools and technology.
This is one of the areas of strategic reinvestment that we highlighted for full year 2024. That will continue to be a ratable investment in the coming years. I expect that as we progress and parts of our technology stack get modernized, we will be able to build for faster velocity for customers with higher productivity internally and ultimately achieve lower run costs. That is a multiyear journey that we have been on for some time. We will continue to be on, again, in a ratable way, in parallel with delivering customer value through our product development efforts. Moving on. Next slide, please. I want to remind you of the three key observations I called out on our full year results as we move to the next phase of our growth. First and foremost, we are well-positioned against a significant long-term opportunity in cloud accounting.
By our estimate, there are over 45 million small businesses globally that can take advantage of what Xero has to offer. Number 2, we have multiple levers for growth and are early on the journey to optimizing them. Number 3, our opportunity is to be more disciplined and customer-focused about how we grow and invest our capital to drive even greater customer value. Supporting this is 4 key principles that I'd like to see us apply as a company to become smarter, faster, and stronger together in our next chapters of investment. The first thing we talk a lot about at Xero is becoming more focused. This means being even more customer-centric in all that we do, and focusing on how we can continually add value for our customers, serve them better and faster, and increase their engagement with Xero. We also talk increasingly about being more dynamic.
This is about being more effective in our short-term allocation of resources operationally, so we can yield maximum benefit from our efforts each year. It also talks about focusing on the levers we have available to us today. Thirdly, we talk a lot about being more measured. That's being more clear in our investments and returns across the portfolio of bets we have at Xero, so we can optimize our capital allocation over the medium and long term and unlock more value for shareholders. I think about capital allocation through the lens of three buckets: core bets, growth bets, and emerging bets. These types of categorizations help us focus our investments and understand our potential for growth and returns across different time horizons and at different levels of scale.
The final principle we talk a lot about is being more balanced, and this is about being more balanced in our financial management as we drive both revenue growth and profitability together. As I've mentioned before, our ambition is to become a truly world-class and higher-performing SaaS company. As part of this, Xero will look to the Rule of 40 as a guardrail, as a useful performance evaluation measure in managing all of these things. The next slide includes our outlook statement for full year 2024, which is unchanged. As we said at the time, we will now seek to balance growth and profitability in our approach to capital management. The operating expense and operating income margin guidance underneath this reflects this.
As we told you in March, along with the reinvestment in strategic priorities, management is targeting an operating expense to revenue ratio in and around 75% for full year 2024. The reinvestment will be split across sales and marketing opportunities and product and design, where, as we mentioned, we are continuing to work on our multi-year modernization journey while investing in creating value for our customers. Moving to the financial evolution slide, this shows you directionally the composition of our ratio in full year 2024, as well as the longer-term trend and evolution of these metrics. In full year 2024, we expect to see improving efficiency across each of our expense lines. In the case of sales and marketing, the flat to down arrow really reflects the optionality to direct spending to revenue-generating opportunities across our multiple levers, of course, with appropriate discipline.
As we've said before, our long-term aspiration is to improve both our operating expense ratio and our operating income margin as Xero and the global cloud accounting industry continue to mature, noting that we haven't set a specific timeline, and there could be variability from period to period as we identify growth opportunities. This reflects the momentum the business has. As I said, I'm really excited about how we're positioned, the opportunity ahead, and the multiple levers we have to grow. I'm also pleased to announce that we'll be hosting our first ever investor day on February 29th, this next year. This will be an opportunity for you to meet all of us, our team, and for us to share with you, our investors, how we will execute on our growth opportunity ahead and drive longer-term shareholder value.
Before I conclude, I want to acknowledge everyone who plays an important part in our journey, in particular, our Xeros, the people across the world who continue to work hard and deliver for our customers and partners. I'd also like to thank David and the Board for their hard work and support, and to you, our shareholders, thank you for your ongoing support. I'll now hand back to David for the formal business of the day.
Well, thanks, Sukhinder, for that update. Let me just stress how delighted we are to have Sukhinder on the team. She's brought a focus and a, you know, drive and an energy to the company that we are very excited about. Thanks, Sukhinder. It's now time to move to the resolutions. Voting for all five resolutions is now open and will remain open for five minutes after the close of the meeting. Our Company Secretary has confirmed that the notice of meeting has been sent to all shareholders and other persons entitled to receive it within the notice period. The matters requiring consideration today are outlined in detail in the notice of meeting. The notice will be taken as read, going forward.
Xero's full year 23 financial statements, together with the auditor's report, are in our annual report, which is available on our website. Now, I want to stress, Resolutions 1, 2, 3, and 5 are ordinary resolutions. This means that to pass, they require more than 50% of votes cast by shareholders entitled to vote and voting on the resolution. Resolution 4 has different requirements for U.S. law purposes and must be passed by the majority, as set out in the notice of meeting. Xero's share registry provider, Link Market Services, will conduct the voting by way of poll, and Andrew Farrell of Link will act as Returning Officer. Votes will be counted after the end of the meeting and results published on the ASX and Xero's website. Shareholders or their proxy holder can cast their vote using the electronic voting card received after validating online registration.
To validate registration, you'll be asked to enter your security holder reference number, the SRN, or your HIN, holder identification number, plus postcode if you're in Australia or country, if you're outside Australia. To then cast your vote, click the Edit Card button. For the proxies, the proxy votes that have been submitted prior to the meeting will be set out on the slide shown for each resolution. For some context, the current number of Xero shares on issue is approximately 151 million shares. Shareholders have appointed the chair of today's meeting, that's me, as proxy for approximately 108 million shares, voting either for, against, or with discretion for all resolutions.
As indicated on the proxy form and in the notice of meeting, my intention as chair is to vote all discretionary or undirected proxies held by me in favor of each resolution. Shareholders can submit written questions via the online portal during the meeting by clicking on the Ask a Question button or by using the teleconference facility, that is now available. To ensure questions reach us in time, look, I would encourage you to submit these as soon as possible, if you haven't already done so. Again, any general shareholder questions submitted during the meeting will be addressed after the formal business is completed. I will endeavor to address as many of the more frequently raised relevant questions as possible during the course of the meeting.
If we do receive multiple questions that are similar, I will try to amalgamate them into one overall question or choose to answer the broadest part of the question and cover off the others as need, as needed. The first resolution relates to the authorization of the board to fix the remuneration of Xero's auditor, and that should be on the screen now. Our auditor is Ernst & Young. If not already submitted, I'd like to invite shareholders now to submit any questions regarding this resolution. The way it'll work, I'll pause for a moment to allow time to receive them from you, and then we'll go to any questions. Let me now ask: Are there any telephone questions from anyone participating on Resolution 1?
Thank you. There are no questions from holders participating by telephone.
Okay, well, thank you very much. Let's now move to any pre-submitted questions. Kate, are there any questions that have come in, from, shareholders?
No, there are no, no questions submitted, David.
Okay. Given that there are no more questions, because of that, we'll now move forward, and I'll just wait to the next resolution. You can see on the screen there that we had the numbers for the first resolution. You can see on the screen now the second one, which is concerning the re-election of Mark Cross as a director of Xero. Now, I do want to say a few words here. Mark retires at this meeting and offers himself for re-election. The board does note the against vote numbers specific to this resolution. The board believes it is important to highlight that Mark is an exceptional director with immense experience, and the against votes recorded here do not reflect the skills, capabilities, and values he has brought to the Xero board.
We acknowledge, though, that the recommendation from ISS, our proxy advisor, against this resolution as a comment on our remuneration report and practices rather than Mark's performance as a board member. While we do not believe this recommendation reflects the significant improvements we have made in our remuneration reporting and practices over the last few years, we do acknowledge the view that ISS holds. The board, other than Mark, recommends Mark to you as a Xero director and unanimously supports his re-election. I'm now going to ask Mark to say a few words about himself.
... Thanks, David. Good morning, everyone, and thank you for the opportunity to seek your support for my re-election. I've reached the end of my first three-year term, and with your support, I'm keen to continue as an independent director of Xero. It was a challenging start as a director, joining right at the beginning of COVID in April 2020, and I think it actually took me about two years before I'd met all my fellow directors in person. I was excited then about joining the board, and Xero has lived up to every expectation over an interesting first term. We've been through a global pandemic, a change in investor views on technology companies in a higher interest rate environment, the appointment of a new CEO, and significant progress towards better balancing growth and profitability.
Through that period, Xero has proven itself to be resilient and hugely important to its small business customers. The long-term growth prospects for Xero remain as valid as ever. As you've seen from my bio, my executive background was in investment banking in New Zealand, Australia, and the U.K. For the last 10 years or so, I've been a professional non-executive director, which has given me exposure to a wide range of industries, companies, and strategic and governance challenges. My capital markets and funds management experience provides me with an understanding of Xero's market position and shareholder expectations. I've chaired the Xero Audit and Risk Management Committee for the last 2 years, and I'm also a member of the People and Remuneration Committee, and both roles enable me to contribute broadly across the company.
Particular focus areas for me over this next term will be building global talent and capability and efficient capital allocation in pursuit of driving long-term shareholder value. With Rule of 40 now something we look to as a useful performance evaluation measure, as Sukhinder referred to, in balancing growth and profitability, efficient capital management will be key. As I seek re-election for a second term, I'd also like to pay tribute to Rod and Lee, our two long-serving departing colleagues. It's been a real privilege to have served alongside you, and my thanks to you both for all that you've done for Xero as directors and your wisdom around the board table. Rod, you've left an incredible legacy, and I'm certain your laser focus on our customers and product will live on around the board table.
I continue to have the drive and capacity to commit myself to being a high-performing director of Xero on your behalf. Rest assured, my primary focus as a director is aligned with yours as owners, as a fellow owner, and to see Xero deliver on its significant potential to create value for its shareholders by being the most trusted and insightful small business platform. With your support, I look forward to working with my fellow directors and the whole Xero team to deliver on these goals. Thank you. Well, thanks, Mark. Now I'd like to invite shareholders to submit any questions regarding this resolution. Once again, I'm gonna pause for a moment to receive your questions, and we'll take any questions from telephone participants now. Are there any questions at all, operator?
Thank you. There are no questions from holders participating by telephone.
Okay. Well, thank you, operator. I'll now take questions from shareholders who may have pre-submitted them, written ones. Kate, are there any questions on Resolution 2?
Yes, we do have a question, David. The question comes from Stephen Mayne, who asks: "Thanks for disclosing the proxies early with the formal addresses. Why was there a 15% protest vote against Mark's re-election, and what are we going to do to address the concerns of the investors and proxy advisors who voted or recommended against? Which proxy advisors recommended against, and why?
Well, Stephen, thanks for the question. As I said, it was ISS, was encouraging us to put our remuneration report to a vote. As you know, under, we're incorporated in New Zealand, and we are not obliged to do that, but we do review it every year, and we'll continue to do so. It was primarily the proxy advisors, people who take advice from there. As you can see from the voting, it was very strongly supportive of Mark, and that's the key thing for this recommendation. Look, we do, we do take feedback from proxy advisors seriously, and we'll continue to review it as we go forward, and whether it's appropriate to have a say on pay, and we wanna be a transparent and open company going forward.
Any other questions at all?
There are no further questions.
Okay. Well, thank you, Kate. As there are no more questions, we're gonna now move on to the next resolution. This is Resolution 3, and it concerns the election of Anjali Joshi. As I mentioned before, Anjali was appointed by the board earlier in July and is now required to stand for election. The board, other than Anjali, recommends Anjali to you as a Xero director and unanimously supports her election. I'll now ask Anjali to say a few words.
Thanks, David. Hello, everyone. It is great to be here in Auckland with the directors and executive team for Xero's 2023 annual meeting. Thank you for the opportunity to present my credentials. I seek your support in this election to serve as an independent board director of Xero. I want to express my admiration for the significant achievements of Xero since its founding. The company has revolutionized the accounting industry, empowering countless businesses worldwide to thrive through its innovative cloud-based platform.... It is now positioned to execute a strategic vision that ensures sustained growth, expands its global footprint, and continues to empower small businesses. I was honored to be asked to serve on the board in July 2023. There are several reasons why I'm excited to join Xero's board.
First, Xero is a purpose-led company that aims to help businesses operate efficiently by leveraging the power of cloud-based accounting. Second, the market for cloud-based accounting services is significant, and the penetration is still very low, offering Xero a strong opportunity to grow its revenue and customer base. Third, the recent changes to the leadership team with Sukhinder Singh Cassidy at the helm, is a great step forward towards next, the next phase of growth. With Sukhinder's dedication and focus, she will make the organization even stronger. Next, I would like to share some of my background and experience, which I hope to draw on to help Xero in the journey forward. I bring to the table the experience and knowledge I have gained throughout my career.
With a solid foundation in product management and engineering, I have a deep understanding of the issues and opportunities at the intersection of technology and business. I also have a strong technical background, having worked in world-class technology organizations like AT&T Bell Labs and Google. At AT&T, I led teams that defined and built scaled networking services. At Google, my teams built many products, including infrastructure services, enterprise and consumer maps, and search products. In both of these organizations, I gained experience in building innovative services that were used by billions of users. Since 2017, I have served on many diverse public boards in the United States, including McClatchy, MobileIron, Lattice Semiconductor, and Iteris. I currently serve on the board of Alteryx, LocoNav, and on the advisory board of the Markkula Center for Applied Ethics.
I'm also a senior advisor at Insight Partners, a venture capital company. During my professional journey, I have developed skills as a visionary leader, who not only envisions the future but also executes strategic plans that drive tangible results. I have had the privilege of leading cross-functional teams, championing innovation, and spearheading transformative projects. I firmly believe in the power of technology to create positive change. With the world evolving at an unprecedented pace, Xero must continue to be a pioneer in the use of emerging technologies to drive business success. From artificial intelligence and machine learning to data analytics, I'm deeply aware of the transformative potential of these technologies and how they can shape the future of services to improve the lives of small businesses, their advisors, and communities. In addition to my professional qualifications, I am committed to making a difference in the wider community.
I'm passionate about sustainability and believe that organizations have a moral obligation to contribute positively to society. As a member of the Xero board, I will advocate for initiatives that prioritize environmental sustainability, ethical business practices, and community engagement. One of my core beliefs is that diversity and inclusion are essential for fostering creativity, innovation, and sustainable growth. I'm passionate about creating an environment where diverse voices are not only heard but celebrated. Across my various board roles, I have also learned how to work effectively as a board member and help develop practices that enable the company and the board to work productively. Working collaboratively with the board, I hope to support Sukhinder with product strategy and execution and to participate in the governance activities of the board.
Thank you for your support to continue to serve on the board, and I remain committed to doing my best to see Xero realize the exciting opportunities that lie ahead. Thank you for your time and consideration. I'll now pass back to David.
Well, thanks, Anjali. I think for all of us, we're delighted to have you on the board, and when you hear about your background, you, you know, contribute so much. You know, we are hopefully going to be able to endorse your membership of the board shortly. Now I would like to invite shareholders to submit any questions regarding this resolution. Once again, I'm gonna pause for a moment to receive your questions, and then we'll go to the telephone operator. Operator, are there any questions at all?
Thank you. There are no questions from holders participating by telephone.
Okay. Well, thank you, operator. Let me now take questions from shareholders who may have submitted them in on the online platform. On Resolution 3, Kate, do we have any other questions?
We do have a question, David. It comes from Stephen Mayne, who asks: Well done on securing new international talent to our board. Could new director, Anjali Joshi, and the Chair comment on the recruitment process that led to her appointment to the board? Was a headhunter involved? Did the full board interview Anjali, and did they interview any other candidates?
Right.
Did Anjali know any of our directors before engaging with the recruitment process?
Okay, well, there's a number of questions in there, Stephen, so let me try to, you know, take you through each one. Yes, this has been a process that's gone off the last 18 months. It's been a rigorous global search. We did use an external recruitment agency. I'm glad to say we had a very rich set of candidates that we considered, but we were very specific about the skills we were looking for, which was around product excellence, technology, and someone who's been in a global business. We did not know Anjali before. There's nobody on the board who knew Anjali before, so there was no connection there.
I know there were some comments made around, you know, Sukhinder and Anjali working at Google. Google's a very large company, and you don't necessarily know everybody who's there. Anjali, I don't know, would you like to say anything in terms of the recruitment process?
... I'd like to ensure, Stephen, that the recruitment process was very, very rigorous. I've been nominated and had to go through the process on several boards before, and I can ensure you that the, all of the processes, as well as the interviews here, were extremely rigorous and the process was completely driven through a very high quality level. Thank you.
Thanks, Anjali. Did I cover all Stephen's questions?
I think you did, David.
Yeah. Great. Okay. Kate, then, any other questions at all?
We do. We, we have another question, from Stephen Mayne-
Yeah
... David. "In 2019, Treasury Wine Estates voluntarily moved to annual elections for directors in line with best practice that occurs in both the U.S. and the U.K.
Mm.
Dual-listed companies like News Corp and Rio Tinto all do this due to the laws in the U.K. and the U.S. and U.K., and BHP has continued doing it even after its U.K. DLC ended in 2021.
Mm.
Can the Chair comment on whether our company will follow this Treasury Wine Estates lead and move to annual elections of directors at the 2024 AGM? What does Ms. Joshi think about this proposal?
Right. Well, well, firstly, I think, Stephen, you're alluding to the our reelection of directors every three years in accordance with our constitution and listing rules. We don't have any plans at the moment to go to annual director elections, but I, having been on a number of international boards, are aware of that practice. Look, we, we will review it in line with directions from in Australia, where we take our lead, but we have no plans to do that at the moment. I, I don't know if, Anjali, you have any comments, but I, I think it's, it's probably best handled by me, but have you got any comments?
I'd just like to say that none of my other boards actually do.
Yeah
... annual elections, so this is not widely happening just yet.
Okay, great. That's where we're at the moment, but, we obviously will continue the discussion. Anything else, Kate?
No further questions, David.
Okay. Well, now we move to Resolution 4, which is, relates to the U.S. incentive scheme. Now I just want to spend a few minutes just explaining the background here. Xero maintains a U.S. incentive scheme, which are now, enables Xeros to be remunerated in the U.S. and is relevant to domiciled employees with share-based incentives, including options or RSUs, or restricted stock units. This scheme requires reapproval by shareholders every 10 years. This was last approved in 2015, with a limit of 4.4 million shares. Xero is requesting the addition of 4.4 million shares to the scheme, to support Xero's continued ability to attract and reward U.S.-based talent, which is really important to us.
If approved by shareholders, the new share allocation limit for awards granted under the U.S. incentive scheme will be 8.8 million ordinary shares. I'd like to invite shareholders to submit any questions they have regarding this resolution, but it is a continuation of a policy we've had. Let me pause for a moment to receive any questions. I will ask the telephone operator if there are any questions.
Thank you. There are no questions from holders participating by telephone.
Okay. Well, thank you, operator. Let me now take any questions from shareholders who might have submitted written questions in the online platform. Kate, do we have any questions on Resolution 4?
We don't, David.
Okay. Well, since we don't have any further questions, let's move on to the next resolution, which is the final resolution for consideration today, which is Resolution 5, and it's a proposal to increase the non-executive director's fee cap. The proposal is to increase the maximum annual fees that may be paid to all of the non-executive directors by NZD 600,000, from NZD 2.7 million to NZD 3.3 million per year per annum. Now, we review director fees every two years. As a result of this review, the Board determined that it was appropriate to seek an increase in the size of the director fee pool.
Now, I want to stress, the proposed increase in the director fee pool, pool does not mean, does not mean directors get an equivalent increase in fees or that the whole of the new maximum amount will be used. It's intended to enable flexibility around board succession and director transitions, particularly regarding geographic composition, and to ensure that Xero can continue to attract and retain high caliber directors in the competitive global market. I mean, just to be clear, I mean, we pay to local market conditions, and therefore, director fees are set by the local geography. There are some small increases to committee fees and specific roles, but these are a very small proportion, amounting to less than 5% of the fee cap increase.
Following a benchmarking process, it was determined that base director fees are in line with our peers. As such, no increase to base fees are proposed in the coming year. I'd like to invite now shareholders to submit any questions regarding this resolution. Once again, I'll just pause for a few seconds, and then I'll ask the operator if there are any questions. Resolution 5. Operator, are there any questions on the telephone?
Thank you. There are no questions from holders participating by telephone.
Well, thank you, operator. Let's now again go to any pre-submitted questions, via the online platform, Kate.
David, we have a pre-submitted question from Neil John Holmes, who asks: Do you really think non-executive remuneration should be increased by over 20%? Perhaps a lot more restraint should be shown.
Well, thanks for that question, Neil. I mean, as I just went through, there is not a 20% increase to directors fees. It is to the pool, and it's to allow us to recruit directors from around the world. I think that really covers off the question. That is, we are not increasing director fees by 20%. It's like the pool. Kate, over to you.
Thanks, David. We have a further question from Stephen Mayne.
Yep
-who asks: Given the interesting discussions across a range of topics today, including this proposed fee increase for the non-executive directors, could the Chair undertake to make an archived copy of the webcast, plus a full transcript of proceedings available on the company's website? The likes of Nine, AGL, ASX, ANZ, Domino's, and Lendlease all produced their first AGM transcripts in 2021. Will you follow suit today?
Yes. Look, like previous years, we'll provide the full webcast archive on our website, and on the investor center, so no problem at all. Any other questions, Kate?
No further questions on this resolution, David.
Okay. Well, that. Thank you, Chris Porter, and you can see on the screen, how the voting went. We are now going to move to general questions that may have been asked by shareholders. We'll, we'll again go to the, you know, any questions on the phone, and then we'll go to pre submitted questions. Operator, any questions at all?
Thank you. There are no questions from holders participating by telephone.
Okay. Well, thank you very much, operator. Kate, back to you on any pre-submitted questions that may have been submitted.
Thanks, David. We have a pre-submitted question by Complex Pty Ltd, who asks: When will dividends start being paid?
Well, I, I want to be clear, we, we have no plans to pay dividends, and the reason is that, you know, Xero is a high-growth company, and all the cash we generate, we are putting back into the business to capitalize on this wonderful market opportunity the company has. Now, we believe that's in the best interest of shareholders in terms of driving value, so we have no plans to pay dividends. Back to you, Kate.
Thank you, David. We have another question from Stephen Mayne, who asks: With a market capitalization of AUD 17.5 billion, surely we're now too big to remain headquartered and primarily listed in New Zealand, particularly given that our chair lives in Australia. Shareholders and software company, TASK Group, recently endorsed a board recommendation to move its head office and primary listing from New Zealand to Australia. Why don't we do the same?
Well, just to, just to be clear, we are incorporated in New Zealand, but listed in Australia, just to be very clear. Look, that, that goes to the deep roots that are in this company in New Zealand, and which we're very proud of, and I think many New Zealanders are. At the moment, we have no plans, but I, I do wanna stress, we, we are becoming a global company, and we're gonna have, you know, directors, executive leaders, you know, spread all around the world. You know, we will remain, you know, open to shareholders and talking to them and engaging with them wherever they come from, but we have no plans to change our ASX listing at the moment. Kate, back to you.
Thank you, David. We have another question from Stephen Mayne, who asks: Thank you for offering shareholders a hybrid AGM this year. Will you commit to keep doing this in future years to maximize shareholder participation, including by those of us over in Australia? Big ASX-listed companies like Bank of Queensland, BHP, Boral, Brickworks, Commonwealth Bank, Flight Centre, Fortescue Ltd, Harvey Norman, or Origin Energy, Ramsay Health Care, Rio Tinto, and SGH Ltd, all banned online questions and voting in 2022. Well done for showing them up. What was the experience like from your end?
Well, I just want to be clear, we are in a virtual meeting. The reason we do it is we want to get as many of our shareholders be able to participate right around the world. I think the general direction is that, you know, directors, you know, who fly from internationally to come to the AGM may be online as well. We are gonna continue with the virtual approach. However, we will continue to review that because I enjoy seeing shareholders in the room, but it is a very efficient way of disseminating information and having an engagement. From our experience, it's good, but I, I do say I do enjoy talking to shareholders and including you, Stephen. I look forward to, you know, that opportunity when it, when it comes up.
Back to you, Kate. Any other questions?
there are no further questions. Thanks, David.
Okay. Well, I think that that brings us to the end of Xero's 2023 annual meeting. I'd like to thank you, shareholders, for all of your questions. Before I formally close the meeting, a quick reminder that if you're intending to vote on the formal business of the meeting, you should finalize and submit your votes now. Voting will close in 5 minutes' time. As mentioned earlier, the results of the voting will be released on the ASX once the votes have been counted after this meeting. I'd like to thank you, all our shareholders, for attending Xero's annual meeting today. You know, I want to say very genuinely, we really do appreciate your support, and we look forward to seeing you maybe next year. I now declare the meeting closed. Thank you.