Sage Group Plc · LSE:SGE
Sage — H1 2020 Earnings Presentation
35 slides from Sage's earnings presentation, May 13, 2020
Slide 1: Sage Interim Results 2020
Sage Interim Results 2020 13 May 2020 #SageResults
Slide 2: Safe Harbour
Safe Harbour The following presentation is being made only to, and is only directed at, persons to whom such presentation protect against potential fraudulent activities; any significant quality problems or delays; the global macro- may lawfully be communicated (“relevant persons”). Any person who i
Slide 3: Steve Hare, CEO: Overview
Steve Hare, CEO Overview Financial review Strategic progress & outlook Q&A #SageResults Sage Group plc Interim Results 2020 3
Slide 4: Highlights of a strong first half
Highlights of a strong first half Financial Strategic Focus performance execution #SageResults Sage Group plc Interim Results 2020 4
Slide 5: Our response to COVID-19
Our response to COVID-19 Colleague Support for Executing wellbeing customers our strategy #SageResults Sage Group plc Interim Results 2020 5
Slide 6: Jonathan Howell, CFO
Jonathan Howell, CFO Overview Financial review Strategic progress & outlook Q&A #SageResults Sage Group plc Interim Results 2020 6
Slide 7: Financial highlights
Financial highlights High quality On target Strong cash Resilient recurring margin conversion balance sheet revenue growth 10.3% 22.8% 127% £1.3bn1 1. Cash and available liquidity as at 31 March 2020 #SageResults Sage Group plc Interim Results 2020 7
Slide 8: P&L summary
P&L summary H1 20 H1 19 Change £m £m % Total Organic Revenue £935m £885m +5.7% Recurring revenue £826m £749m +10.3% Organic operating profit £213m £207m +3.0% Organic operating profit margin % 22.8% 23.4% -0.6% pts Underlying operating profit £218m £216m +0.9% Underlying operating profit margin % 22
Slide 9: Revenue categories
Revenue categories Recurring revenue penetration £935m +5.7% 88% Software Software subscription £464m subscription £582m +26% penetration +10.3% 62% Recurring revenue Other recurring £285m £244m -15% Renewal Other (SSRS and by value processing) £136m £109m -20% 101% H1 19 H1 20 #SageResults Sage Gro
Slide 10: Portfolio view of recurring revenue
Portfolio view of recurring revenue £826m +10.3% £105m +31% Cloud native £80m Sage Cloud connected £210m £307m +46% Business Cloud penetration +12% 56% Future Sage Business To be migrated £362m £900m -12% Cloud £319m Opportunity Non-Sage Business Cloud £97m £95m -2% H1 19 H1 20 #SageResults Sage Gro
Slide 11: Regional overview
Regional overview #SageResults Sage Group plc Interim Results 2020 11
Slide 12: North America
North America 59% H1 20 performance US (excluding Sage Intacct) 70% Software subscription penetration • 7% recurring revenue growth H1 19: 55% • Cloud connected growth driven by Sage 200 Sage Business Cloud migrations penetration H1 19: 64% Canada Organic Revenue by Category H1 20 H1 19 Growth • 10%
Slide 13: Northern Europe
Northern Europe 84% H1 20 performance 80% Software subscription penetration • Recurring revenue growth 13% H1 19: 63% Sage Business Cloud – Sage Business Cloud penetration now at penetration 80% H1 19: 59% – Reflecting strong growth in H2 19 and new Sage 50 cloud connected contracts Organic Revenue
Slide 14: Central and Southern Europe
Central and Southern Europe 52% H1 20 performance 35% Software subscription penetration France H1 19: 43% • 4% recurring revenue growth Sage Business Cloud penetration • Growth driven by cloud connected products H1 19: 21% in FY19 aided by new contracts in H1 20 Organic Revenue by Category H1 20 H1
Slide 15: International
International 62% H1 20 performance 12% Software subscription penetration Africa and Middle East H1 19: 56% • 15% recurring revenue growth Sage Business Cloud penetration • Local products and continued strong H1 19: 8% performance in Sage Accounting Organic Revenue by Category H1 20 H1 19 Growth Aus
Slide 16: Strong cash flow and financial position
Strong cash flow and financial position Key metrics Underlying Underlying cash Underlying cash £218m 127% flow from operating £276m conversion operating profit activities Depreciation and £29m Non-recurring items (£2m) Cash and available amortisation £1.3bn liquidity Share-based payments £9m Net int
Slide 17: Capital allocation
Capital allocation To become a great SaaS company for customers and colleagues alike 1 2 3 4 Organic M&A and portfolio Maintain the ordinary Additional investment rationalisation dividend in real terms returns Strong and stable financial position Broad range of 1.0x – 2.0x net debt: EBITDA over the
Slide 18: Summary
Summary High quality On target Strong cash Resilient recurring margin conversion balance sheet revenue growth 10.3% 22.8% 127% £1.3bn1 1. Cash and available liquidity as at 31 March 2020 #SageResults Sage Group plc Interim Results 2020 18
Slide 19: Steve Hare, CEO
Steve Hare, CEO Overview Financial review Strategic progress & outlook Q&A #SageResults Sage Group plc Interim Results 2020 19
Slide 20: Transitioning the business
Transitioning the business Software subscription 44% Software subscription Recurring 62% revenue 78% Recurring Recurring Software revenue 88% revenue >90% subscription >90% Maintenance & Support 34% Maintenance & Support 26% Other 22% Other Other 12% <10% FY 18 H1 20 Future #SageResults Sage Group p
Slide 21: Building ARR
Building ARR Opening ARR1 100% £1.54bn Churn Migration, upsell & cross-sell Existing customers Renewal by value 101% £1.56bn Reactivations New customers New customer acquisition Closing ARR 110% £1.69bn 1. As at the end of the comparative period (31 March 2019) #SageResults Sage Group plc Interim Re
Slide 22: Customer success
Customer success Taking a customer-centric approach to everything we do H1 20 progress – Small • Focus on end-to-end experience and product integration • Focus on accountants H1 20 progress – Medium • Simplified industry vertical focus • Partner engagement COVID-19 • Coronavirus hubs and webinars •
Slide 23: Colleague success
Colleague success Culture that values individuals & encourages collaboration H1 20 progress • Investment in leaders and colleagues • Embedded values and behaviours • Sage Foundation support COVID-19 • All colleagues working from home • Networking groups and eLearning • Support for physical and menta
Slide 24: Innovation – Sage Business Cloud vision
Innovation – Sage Business Cloud vision Enabling organizations to thrive in the era of digital transformation MARKETPLACE SAGE DESIGN SYSTEM APPLICATIONS SERVICES DIGITAL EXPERIENCE SERVICES CUSTOMER JOURNEY PLATFORMS SAGE ID AND DIRECTORY #SageResults Sage Group plc Interim Results 2020 24
Slide 25: Innovation – highlights
Innovation – highlights Solving customer problems by doing things differently H1 20 progress – Small • Sage Accounting Professional soft launch in UK • CakeHR cloud solution for small businesses H1 20 progress – Medium • Sage Intacct growth in new geographies • Sage Intacct Construction launched Sag
Slide 26: Innovation – Sage Business Cloud portfolio
Innovation – Sage Business Cloud portfolio Cloud Connected Cloud Native Accounting & Financials People & Payroll Sage X3 Sage Intacct Sage People Sage 200 Cloud MEDIUM Sage 50 Cloud CakeHR Sage Accounting Sage 50 Payroll Sage Payroll SMALL Sage Service Fabric #SageResults Sage Group plc Interim Resu
Slide 27: FY20 guidance
FY20 guidance As a result of COVID-19, we expect: • Organic recurring revenue growth to be below the previously guided range of 8% to 9% • Decline in other revenue (SSRS and processing) to accelerate significantly in the second half • An associated impact on margin #SageResults Sage Group plc Interi
Slide 28: Key messages
Key messages Investing for Strong first Resilient the long half business term #SageResults Sage Group plc Interim Results 2020 28
Slide 29: Q&A
Q&A #SageResults #SageResults Sage Group plc Interim Results 2020 29
Slide 30: Appendix: Strategic KPIs
Appendix Strategic KPIs ARR Subscription Sage Business Renewal penetration Cloud penetration by value +10% 62% 56% 101% #SageResults Sage Group plc Interim Results 2020 30
Slide 31: Appendix: Balance sheet strength
Appendix Balance sheet strength Net debt Cash and Cash and cash Undrawn leverage ratio available liquidity equivalents facilities 0.5x £1.3bn £912m £413m Debt facilities: • Syndicated multi-currency Revolving Credit Facility of £715m, expiring in February 2025, with £302m (H1 19: £274m) drawn as at
Slide 32: Glossary
Glossary Measure/Description Underlying (revenue and profit) measures Underlying measures are adjusted to exclude items which would distort the understanding of the performance for the year or comparability between periods: − Recurring items include purchase price adjustments including amortisation
Slide 33: Glossary
Glossary Measure/Description Free cash flow Free Cash Flow is Cash Flow from Operating Activities minus non-recurring cash items, interest paid, tax paid and adjusted for profit and loss foreign exchange movements. % Subscription Penetration Organic software subscription revenue as a percentage of o
Slide 34: Glossary – Revenue types
Glossary – Revenue types Measure/Description Revenue Type Description Recurring revenue Recurring revenue is revenue earned from customers for the provision of a good or service over a contractual term, with the customer being unable to Subscription contracts continue to benefit from the full functi
Slide 35: Thank you
Thank you © 2020 The Sage Group plc or its licensors. Sage, Sage logos, Sage product and service names mentioned herein are the trademarks of The Sage Group plc or its licensors. All other trademarks are the property of their respective owners.