Sage Group Plc · LSE:SGE
Sage — FY2018 Earnings Presentation
45 slides from Sage's earnings presentation, 2018
Slide 1: Year-end results Financial Year 2018
Year-end results Financial Year 2018 Samantha Jameson Founder, Soapsmith #SageResults
Slide 2: Safe harbour
Safe harbour The following presentation is being made only to, and is only directed at, persons to among others: Inherent difficulty in predicting customer behaviour; customers may whom such presentation may lawfully be communicated (“relevant persons”). Any not respond as we expected to our sales a
Slide 3: Welcome - Steve Hare, CEO
Steve Hare @SteveHare CEO Welcome Overview Financial review Strategy Outlook Q&A 3 #SageResults Sage Group plc Financial Year 2018
Slide 4: The vision
The vision To become a great SaaS business for customers and colleagues alike 4 #SageResults Sage Group plc Financial Year 2018
Slide 5: Derk Bleeker - Financial review
Derk Bleeker @BleekerDerk EVP Commercial Finance & Corporate Development Welcome Overview Financial review Strategy Outlook Q&A 5 #SageResults Sage Group plc Financial Year 2018
Slide 6: FY18 summary
FY18 summary Challenging Strong Momentum FY18 Cash Flow into FY19 6 #SageResults Sage Group plc Financial Year 2018
Slide 7: Revenue summary
Revenue summary FY18 FY17 Growth Organic1 revenue £1,819m £1,703m 6.8% Asset held for sale £38m £39m Organic revenue plus asset held for sale £1,857m £1,742m 6.6% Prior year organic adjustments - (£59m) FX adjustment - £37m Deferred income unwind of Sage Intacct (£11m) (£5m) Statutory revenue £1,846
Slide 8: Margin summary
Margin summary FY18 FY17 Change Organic operating profit margin % 27.8% 28.0%1 (0.2%) Underlying2 operating profit margin % 27.2% 27.3% (0.1%) Non-recurring charge £10m £70m Underlying adjusted EPS2 32.51p 28.46p 14.2% EBITDA2 margin % 29.2% 29.4% (0.2%) 1 As reported 2 See appendix for definitions
Slide 9: Operating profit margin bridge
Operating profit margin bridge 30% 0.6% 2.2% 1.3% 25% 28.0% 27.8% 27.2% 25.8% 20% FY17 Organic Sage Intacct, Sage FY17 Pro Forma Uplift of Core FY18 Underlying Sage Payroll FY18 Organic Margin (as People & FX Margin Business Margin Solutions Margin reported) 9 #SageResults Sage Group plc Financial Y
Slide 10: Strong cash flow metrics
Strong cash flow metrics Underlying operating profit £504m Opening net debt (£813m) Free cash flow £356m Underlying cash flow from £482m Ordinary dividends (£171m) operating activities1 M&A and exchange movements (£40m) Free cash flow1 £356m Closing net debt (£668m) Free cashflow as a % of revenue 1
Slide 11: Revenue categories
Revenue categories +6.8% 79% Recurring mix Software FY 17: 79% subscription +25% +6.7% Recurring Maintenance & revenue Support -12% 46% SSRS +8% Software subscription Processing +6% penetration FY 17: 39% FY 17 FY 18 11 #SageResults Sage Group plc Financial Year 2018
Slide 12: Progress in FY18 strategy: cloud connected
Progress in FY18 strategy: cloud connected Revenue FY18 ARR Growth Cloud connected1 £280m 66% Cloud native2 £153m 30% Sage Business Cloud £434m 51% 1 Cloud connected versions of Sage 50 and Sage 200 families 2 Sage Accounting, Sage Financials, Sage People, Sage Intacct & cloud version of Sage Enterp
Slide 13: Progress in strategy: cloud native
Progress in strategy: cloud native Revenue FY18 ARR Growth Cloud connected1 £280m 66% Cloud native2 £153m 30% Sage Business Cloud £434m 51% 1 Cloud connected versions of Sage 50 and Sage 200 families 2 Sage Accounting, Sage Financials, Sage People, Sage Intacct & cloud version of Sage Enterprise Man
Slide 14: Revenue categories
Revenue categories +6.8% 79% Recurring mix Software FY 17: 79% subscription +25% +6.7% Recurring Maintenance & revenue Support -12% 46% SSRS +8% Software subscription Processing +6% penetration FY 17: 39% FY 17 FY 18 14 #SageResults Sage Group plc Financial Year 2018
Slide 15: Our Journey to Subscription
Our Journey to Subscription Software subscription 16% Software subscription 46% Recurring revenue Maintenance & Support Software subscription 85-90% Maintenance & Support SSRS and Processing SSRS and Processing SSRS and Processing 1 As reported FY141 FY18 Target 15 #SageResults Sage Group plc Financ
Slide 16: Regional overview
Regional overview 16 #SageResults Sage Group plc Financial Year 2018
Slide 17: North America
North America 48% FY18 performance • Double digit organic and recurring revenue growth 86% Software subscription • Strong progress in cloud connected and penetration Enterprise Management FY17: 35% • Intacct ARR around £100m, growing at 30% Recurring mix FY17: 85% Focus for FY19 Revenue FY18 FY17 Gr
Slide 18: Northern Europe
Northern Europe 47% FY18 performance • Significant progress in transition to subscription • Strong H2 18 performance in cloud connected 78% Software subscription • Addressed issues raised at H1 18 penetration FY17: 38% Recurring mix FY17: 79% Focus for FY19 Revenue FY18 FY17 Growth • Cloud connected
Slide 19: France
France 59% FY18 performance • Recovery in H2 18 with 6% growth • Cloud connected revenue now 10% 85% Software subscription • Enterprise Management growth of 12% penetration FY17: 56% Recurring mix FY17: 85% Focus for FY19 Revenue FY18 FY17 Growth • Cloud connected migration Recurring £248m £241m +3%
Slide 20: Central Europe and Iberia
Central Europe and Iberia 21% FY18 performance • Germany organic growth 10% • Spain organic growth 8% 68% Software subscription • Smaller regions performing well, e.g. Portugal penetration 17%, Poland 11%, FY17: 18% Recurring mix FY17: 70% Focus for FY19 Revenue FY18 FY17 Growth • Driving subscripti
Slide 21: International
International 59% FY18 performance • Africa 6% and ME decline of 25% both impacted by Enterprise Management 74% Software performance issues subscription penetration • Australia growing strongly at 11%, Asia decline of 5% FY17: 56% • Brazil 3%, with strong recovery in H2 Recurring mix FY17: 73% Focus
Slide 22: IFRS 15 impact
IFRS 15 impact FY19 Financial Statements Areas impacted FY19 FY18 • Unbundling of certain on- premise subscription contracts Revenue IFRS15 Old • Contract sign-up costs Expense IFRS15 Old • Commissions Assets IFRS15 Old • Business Partner contracts Liabilities IFRS15 Old 22 #SageResults Sage Group p
Slide 23: IFRS 15 impact: FY18 pro-forma and FY19 expected
IFRS 15 impact FY18 pro-forma impact: • Organic revenue lower by £10m • Recurring revenue lower by £3m FY19 expected impact: • No material impact on like for like growth rates • No material impact on margins 23 #SageResults Sage Group plc Financial Year 2018
Slide 24: FY18 summary
FY18 summary Challenging Strong Momentum FY18 Cash Flow into FY19 24 #SageResults Sage Group plc Financial Year 2018
Slide 25: The vision
The vision To become a great SaaS business for customers and colleagues alike 25 #SageResults Sage Group plc Financial Year 2018
Slide 26: Benefits of subscription
Benefits of subscription Higher Higher Higher contract retention lifetime values rates revenue Better Lower CAC Lower cost customer to serve economics Value Creation 26 #SageResults Sage Group plc Financial Year 2018
Slide 27: Steve Hare - Strategy
Steve Hare @SteveHare CEO Welcome Overview Financial review Strategy Outlook Q&A 27 #SageResults Sage Group plc Financial Year 2018
Slide 28: The vision
The vision To become a great SaaS business for customers and colleagues alike 28 #SageResults Sage Group plc Financial Year 2018
Slide 29: Focus for FY19
Focus for FY19 Customer Colleague Innovation success success 29 #SageResults Sage Group plc Financial Year 2018
Slide 30: Customer success
Customer success Starts with our existing customers Today • Trust • Excellent customer service Investment • Personalised customer experience • Tools & systems 30 #SageResults Sage Group plc Financial Year 2018
Slide 31: Colleague success
Colleague success Culture that values individuals & encourages collaboration Today • Colleagues that care • Unlock colleague potential Investment • Training • Tools & systems 31 #SageResults Sage Group plc Financial Year 2018
Slide 32: Perform
Perform • Increased retention rates • Improved Customer Experience • Engaged Colleagues • £2m annualised benefits • 7 month payback 32 #SageResults Sage Group plc Financial Year 2018
Slide 33: Innovation
Innovation Accelerating Sage Business Cloud Today • Award winning solutions • Developer Portal Investment • Enhancing Sage Business Cloud • Service Fabric 33 #SageResults Sage Group plc Financial Year 2018
Slide 34: Internationalisation of Sage Intacct
Internationalisation of Sage Intacct 34 #SageResults Sage Group plc Financial Year 2018
Slide 35: £60m investment in FY19
Focus for FY19 £60m investment in FY19 Customer Colleague Innovation success success 35 #SageResults Sage Group plc Financial Year 2018
Slide 36: Focus and simplification
Focus and simplification £1.8bn £140m Cloud Native £230m Cloud Connected £1.5bn 8% growth Future Sage Business Cloud £1.1bn To be migrated to Sage Business Cloud £350m 0% growth No current path to Sage Business Cloud FY18 36 #SageResults Sage Group plc Financial Year 2018
Slide 37: FY19 guidance
FY19 guidance Recurring Organic £60m revenue operating investment in growth margin the business 8%-9% 23%-25% 37 #SageResults Sage Group plc Financial Year 2018
Slide 38: The fish model
The fish model Amount Revenue Costs Time 38 #SageResults Sage Group plc Financial Year 2018
Slide 39: Sage model
Sage model Amount Revenue Costs Time 39 #SageResults Sage Group plc Financial Year 2018
Slide 40: Target margin progression
Target margin progression COGS Recurring expenses R&D ~ 40% G&A Revenue 100% GTM Recurring margin ~60% Margin 40 #SageResults Sage Group plc Financial Year 2018
Slide 41: The vision
The vision To become a great SaaS business for customers and colleagues alike 41 #SageResults Sage Group plc Financial Year 2018
Slide 42: Q&A
Q&A #SageResults 42 #SageResults Sage Group plc Financial Year 2018
Slide 43: Glossary
Glossary Measure/Description Underlying Underlying measures are adjusted to exclude items which would distort the understanding of the performance for the year or comparability between periods: • Recurring items purchase price adjustments including amortisation of acquired intangible assets and adju
Slide 44: Glossary
Glossary Measure/Description EBITDA EBITDA is defined as underlying operating profit excluding depreciation, amortisation and share based payments. Annualised recurring revenue (“ARR”) Annualised recurring revenue (“ARR”) is the normalised reported recurring revenue in the last month of the reportin
Slide 45: 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, where risks and rewards are Subscription contracts transferred to the customer over the term of a contract, with the cust