Sage Group Plc · LSE:SGE

Sage — FY2023 Earnings Presentation

42 slides from Sage's earnings presentation, Nov 22, 2023

Slide 1: Sage Full-Year Results
Sage Full-Year Results For the year ended 30 September 2023 22 November 2023
Slide 2: Important notice
Important notice The following presentation is being made only to, and is only directed at, persons to whom such factors include, among others: inherent difficulty in predicting customer behaviour; customers presentation may lawfully be communicated (“relevant persons”). Any person who is not a rele
Slide 3: Steve Hare, CEO
Steve Hare CEO • Overview • Financial review and outlook • Strategic update • Q&A
Slide 4: Strong performance driven by consistent strategic execution
Strong performance driven by consistent strategic execution Sustained • Continued broad-based growth across the Group. momentum • Resilient business model supported by strong industry dynamics. Innovation-led • Growth fuelled by investment in innovation. growth • Sage Network is enabling efficient d
Slide 5: Jonathan Howell, CFO
Jonathan Howell CFO • Overview • Financial review and outlook • Strategic update • Q&A
Slide 6: Strong financial performance
Strong financial performance High quality recurring Expanding Strong cash revenue growth margin conversion 12% 20.9% 116% FY22: 7% FY22: 19.5% FY22: 107% Unless otherwise stated, all references in this presentation to revenue, profit and margin are on an underlying basis. © 2023 The Sage Group plc,
Slide 7: Robust growth drivers
Robust growth drivers ARR growth Cloud native Renewal by value ARR growth 11% 28% 102% FY22: 12% FY22: 46% FY22: 101% © 2023 The Sage Group plc, or its licensors. All rights reserved. Page 7
Slide 8: Efficient growth driving earnings
Efficient growth driving earnings Underlying FY23 FY22 Change Organic change Total revenue £2,184m £1,982m +10% +10% Recurring revenue £2,096m £1,875m +12% +11% Operating profit £456m £386m +18% +22% Operating profit margin % 20.9% 19.5% +1.4 ppts +2.2 ppts EBITDA £553m £477m +16% EBITDA margin % 25
Slide 9: Sage Business Cloud driving growth
Sage Business Cloud driving growth Recurring revenue +£221m (+12%) +177 (113) +6 (19) 2,184 +151 1,982 Sage Business Cloud +£328m (+25%) © 2023 The Sage Group plc, or its licensors. All rights reserved. Page 9
Slide 10: Further growth in subscription
Further growth in subscription +10% £2,184m 79% software subscription penetration Software £1,732m +17% £1,484m subscription Recurring revenue £2,096m (+12%) 96% recurring revenue penetration £391m Other recurring £364m -7% £107m Other (SSRS) £88m -18% FY22 FY23 © 2023 The Sage Group plc, or its lic
Slide 11: Portfolio growth in line with strategy
Portfolio growth in line with strategy +12% £2,096m Cloud £596m +34% native £445m Future Sage Business Cloud Opportunity 84% Sage Business £855m Cloud connected £1,032m +21% £1,944m (+12%) Cloud penetration To be £429m migrated £316m -26% £146m Non-SBC £152m +4% FY22 FY23 © 2023 The Sage Group plc,
Slide 12: North America: broad-based growth
North America: broad-based growth US Sage Business Cloud penetration FY23 86% • Strong growth in Sage Intacct, with continued +7 ppts success in attracting new customers. FY22 79% Software subscription penetration • Supported by continued strong sales to existing customers through cross-sell and up-
Slide 13: UKIA: continuing strength
UKIA: continuing strength UK & Ireland Sage Business Cloud penetration FY23 90% • Cloud native driven by continued growth in small +11 ppts business solutions. FY22 79% Software subscription penetration • Further progress in scaling Sage Intacct through both the direct and partner channels. FY23 89%
Slide 14: Europe: good momentum
Europe: good momentum France Sage Business Cloud penetration FY23 73% • Strong performance in cloud connected products, +9 ppts particularly Sage 200 cloud, supported by growth in FY22 64% cloud native solutions. Software subscription penetration Iberia FY23 70% +5 ppts FY22 65% • Growth reflects fu
Slide 15: Investment driving growth and margin
Investment driving growth and margin ARR growth and underlying operating margin Progression over last three years Sales and Marketing £836m (FY22: £779m) 40% ARR growth1 +4% +12% +11% as % of recurring revenue Underlying Research and Development £342m operating margin2 19.7% 19.5% 20.9% (FY22: £307m
Slide 16: Strong cash generation
Strong cash generation 116% Underlying cash conversion +43 0 (22) 528 (124) +51 456 404 See appendix for definitions © 2023 The Sage Group plc, or its licensors. All rights reserved. Page 16
Slide 17: Robust financial position
Robust financial position Net debt leverage Net debt Cash and liquidity 1.0x £561m £1.3bn • Issued €500m 5-year Notes under new EMTN programme in February, used to repay outstanding US private placement loan notes, extending debt maturity profile and diversifying funding sources. • Launched share bu
Slide 18: Outlook
Outlook Sage enters FY24 with strong momentum. Looking ahead, we expect: • To deliver organic total revenue growth in FY24 broadly in line with FY23. • Operating margins to trend upwards in FY24 and beyond, as we focus on efficiently scaling the Group. Scale Your Sales Sage customer © 2023 The Sage
Slide 19: Steve Hare, CEO
Steve Hare CEO • Overview • Financial review and outlook • Strategic update • Q&A
Slide 20: Strategic framework for growth
Strategic framework for growth Purpose To knock down barriers so everyone can thrive Ambition To be the trusted network for small and mid-sized businesses Strategic priorities Scale Expand medium Build the small Scale the network Learn and disrupt Sage Intacct beyond financials business engine Stake
Slide 21: Consistent strong strategic progress
Consistent strong strategic progress Transforming Growing Sage Business Cloud penetration Group ARR (and growth) 84% £2.0bn £2.2bn 75% £1.7bn £1.7bn £1.8bn 66% 58% 48% +12% +11% +2% +4% FY19 FY20 FY21 FY22 FY23 Driving growth FY19 FY20 FY21 FY22 FY23 through innovation Investing Innovating R&D spend
Slide 22: Focusing on our customers
Focusing on our customers SMBs are resilient, dynamic and agile Number of SMBs consistently grows over time SMBs are investing more in technology Technology spend by SMBs up 16% over the last 12 months Technology is key to resolving pain points SMBs see AI as a potential driver for innovation and ef
Slide 23: Sage Network is our platform
Sage Network is our platform Creating connections across business ecosystems Sage Network is a set of integrated Cost-effective Customer benefit products and Enables AI and traditional Digitises and automates services, enabling API services to be scaled workflows both within and across multiple prod
Slide 24: Scale Sage Intacct
Strategic priority 1 Scale Sage Intacct Accelerate the expansion of Sage Intacct in existing and new markets Progress update • Further extended Sage Intacct’s geographical and vertical reach. • Sage Intacct ARR grew by around £100m in FY23. ““We consider Sage Intacct to be the best solution to meet
Slide 25: Expand medium beyond financials
Strategic priority 2 Expand medium beyond financials Broaden the value proposition for mid-sized businesses Progress update • Expanded Sage Intacct Payroll into Canada. • Launched integration between Sage Intacct, Sage Payroll and Sage HR in South Africa and Canada. • Increased availability of Sage
Slide 26: Build the small business engine
Strategic priority 3 Build the small business engine Create a scalable digital ‘engine’ to acquire and serve small business customers Progress update • Sage for Accountants adopted by 8,000 UK accountancy practices within two years of launch. • Solution now integrates with Sage 50 and Sage Accountin
Slide 27: Scale the network
Strategic priority 4 Scale the network More Increase participation in the Sage Network and customers accelerate the network effect Progress update Better More Sage network • Grew Sage Business Cloud penetration, enabling customer Network activity more customers to connect to the Sage Network. experi
Slide 28: Learn and disrupt
Strategic priority 5 Learn and disrupt Build innovative solutions underpinned by a culture of continuous learning and disruption Progress update • Launched Sage Network Inbox, a connected accounting workflow management tool. • Developing and testing Sage Copilot, our digital assistant. ““Having visi
Slide 29: Delivering for our stakeholders
Delivering for our stakeholders Customers Colleagues Society Shareholders • Human customer service and • Inclusive, accountable and high- • Progress towards climate • Targeting sustainable growth advice. performing culture. targets; developed NatWest in shareholder value. • Advocate for SMBs among •
Slide 30: Creating value through efficient growth
Creating value through efficient growth Strategic framework is delivering growth in all regions. Creating a scalable platform Differentiated by our leading technology, the to deliver sustained, breadth of our business and our human touch. efficient growth Growth creates headroom to increase investme
Slide 33: Appendix
Appendix r
Slide 34: Sage Business Cloud portfolio
Sage Business Cloud portfolio Cloud Connected Cloud Native Accounting and Financials People and Payroll Mid-sized • Sage 200 cloud • Sage Intacct • Sage People • Sage X3 businesses Small • Sage 50 cloud • Sage Accounting • Sage HR businesses • Sage 50 Payroll • Sage Active • Sage Payroll Sage Networ
Slide 35: Building ARR
Building ARR Opening ARR1 100% £1.96bn Existing Churn customers Up-sell and cross-sell Renewal by value 102% £2.00bn New New customer +£190m customers acquisition ARR Closing ARR 111% £2.19bn 1. As at the end of the comparative period (30 September 2022), stated on an organic basis at current period
Slide 36: Bridge from underlying to organic
Bridge from underlying to organic ARR Recurring revenue Total revenue Operating profit £m FY23 FY22 Growth FY23 FY22 Growth FY23 FY22 Growth FY23 FY22 Growth Underlying 2,188 1,964 +11% 2,096 1,875 +12% 2,184 1,982 +10% 456 386 +18% Acquisitions1 (2) - (1) 11 (2) 11 1 (11) Disposals2 - - - (4) - (7)
Slide 37: Capital allocation
Capital allocation 4. Consider 3. Grow the 1. Organic returning 2. M&A dividend investment surplus over time capital Strong and stable financial position Broad range of 1.0x–2.0x net debt to EBITDA over the medium term, with flexibility to move outside this range as business needs require © 2023 The
Slide 38: Sustainability highlights
Sustainability highlights Protect the Planet Tech for Good Human by Design • Pledged to get to net zero by 2040 • Helping SMBs thrive by building • Scaling sustainably through a and to halve emissions by 2030. trusted and inclusive digital diverse, high-performing, and networks and solutions. human-
Slide 39: Glossary
Glossary Measure/description Underlying (revenue and profit) measures Organic (revenue and profit) measures Underlying measures are adjusted to exclude items which in management’s In addition to the adjustments made for Underlying measures, Organic measures: judgement need to be disclosed separately
Slide 40: Glossary
Glossary Measure/description Underlying Cash Flow from Operations Renewal Rate by Value Underlying Cash Flow from Operations is Underlying Operating Profit adjusted for The ARR from renewals, migrations, upsell, and cross-sell of active customers at non-cash items, net capital expenditure (excluding
Slide 41: Glossary
Glossary 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 Subscription revenue customer being unable to continue to benefit from the full functionality of the good or service without
Slide 42: About Sage
About Sage Sage exists to knock down barriers so everyone can thrive, starting with the millions of Small and Mid-Sized Businesses (SMBs) served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and

Sage Group — FY2023 Earnings Presentation on 6ix

Sage — FY2023 Earnings Presentation

Slide 1: Sage Full-Year Results

Slide 2: Important notice

Slide 3: Steve Hare, CEO

Slide 4: Strong performance driven by consistent strategic execution

Slide 5: Jonathan Howell, CFO

Slide 6: Strong financial performance

Slide 7: Robust growth drivers

Slide 8: Efficient growth driving earnings

Slide 9: Sage Business Cloud driving growth

Slide 10: Further growth in subscription

Slide 11: Portfolio growth in line with strategy

Slide 12: North America: broad-based growth

Slide 13: UKIA: continuing strength

Slide 14: Europe: good momentum

Slide 15: Investment driving growth and margin

Slide 16: Strong cash generation

Slide 17: Robust financial position

Slide 18: Outlook

Slide 19: Steve Hare, CEO

Slide 20: Strategic framework for growth

Slide 21: Consistent strong strategic progress

Slide 22: Focusing on our customers

Slide 23: Sage Network is our platform

Slide 24: Scale Sage Intacct

Slide 25: Expand medium beyond financials

Slide 26: Build the small business engine

Slide 27: Scale the network

Slide 28: Learn and disrupt

Slide 29: Delivering for our stakeholders

Slide 30: Creating value through efficient growth

Slide 31: Key messages

Slide 32: Q&A

Slide 33: Appendix

Slide 34: Sage Business Cloud portfolio

Slide 35: Building ARR

Slide 36: Bridge from underlying to organic

Slide 37: Capital allocation

Slide 38: Sustainability highlights

Slide 39: Glossary

Slide 40: Glossary

Slide 41: Glossary

Slide 42: About Sage