Sage Group Plc · LSE:SGE

Sage — The Sage Group — FY2022 Earnings Presentation

41 slides from Sage's earnings presentation, Nov 16, 2022

Slide 1: Sage Full-Year Results
Sage Full-Year Results For the year ended 30 September 2022 16 November 2022
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 4: Strong execution accelerates growth
Strong execution accelerates growth • Accelerating growth driven by cloud solutions. Momentum • Faster pace of product development and innovation. • Growing market opportunity driven by digitisation. Growth • Mission-critical solutions underpin resilient business model. • Good strategic progress and
Slide 5: Jacqui Cartin, Group Financial Controller
Jacqui Cartin Group Financial Controller • Overview • Financial review and outlook • Strategic update • Q&A © 2022 The Sage Group plc, or its licensors. All rights reserved. Page 5
Slide 6: FY22 financial highlights
FY22 financial highlights High quality recurring Expanding Strong cash revenue growth margin conversion 9% 19.9% 107% FY21: 5% FY21: 19.5% FY21: 126% © 2022 The Sage Group plc, or its licensors. All rights reserved. Page 6
Slide 7: Growth drivers
Growth drivers ARR growth Cloud native Renewal by value ARR growth 12% 38% 101% FY21: 8% FY21: 43% FY21: 99% © 2022 The Sage Group plc, or its licensors. All rights reserved. Page 7
Slide 8: P&L summary
P&L summary FY22 FY21 Change Total organic revenue £1,924m £1,809m +6% Recurring revenue £1,824m £1,667m +9% Organic operating profit £383m £353m +8% Organic operating profit margin % 19.9% 19.5% +0.4 ppts Underlying operating profit £377m £368m +2% Underlying operating profit margin % 19.4% 19.6% -
Slide 9: Revenue bridge
Revenue bridge Recurring revenue +£157m (+9%) +120 (73) (12) (42) +122 1,924 1,809 Sage Business Cloud +£242m (+24%) © 2022 The Sage Group plc, or its licensors. All rights reserved. Page 9
Slide 10: Revenue categories
Revenue categories +6% £1,924m 75% software subscription Software £1,445m +14% penetration £1,263m subscription Recurring revenue £1,824m (+9%) 95% recurring revenue £404m Other recurring -6% penetration £379m £142m Other (SSRS) £100m -30% FY21 FY22 © 2022 The Sage Group plc, or its licensors. All r
Slide 11: Portfolio view of recurring revenue
Portfolio view of recurring revenue +9% £1,824m Cloud native £419m +41% £297m £722m Cloud connected £842m +17% Future Sage Business Cloud Opportunity 75% Sage Business £1,683m (+11%) Cloud penetration £495m To be migrated £422m -15% £153m Non-SBC £141m -8% FY21 FY22 © 2022 The Sage Group plc, or its
Slide 12: North America
North America Sage Intacct Sage Business Cloud penetration • Continued strength in new customer acquisition. FY22 79% +6 ppts • Strong sales to existing customers through increased FY21 73% cross-sell and up-sell. Software subscription penetration US FY22 73% • Progress in Sage Intacct alongside gro
Slide 13: Northern Europe
Northern Europe Recurring revenue growth Sage Business Cloud penetration • Strong and accelerating growth in cloud native solutions. FY22 90% +4 ppts • Supported by further growth in Sage 50 cloud. FY21 86% Cloud native growth Software subscription penetration • Cloud native growth driven by new cus
Slide 14: International
International France Sage Business Cloud penetration • Strong performance in cloud connected products, FY22 59% +12 ppts supported by further growth in cloud native solutions. 47% FY21 Central Europe Software subscription penetration • Reflects strong growth from cloud connected and local products.
Slide 15: Investment driving growth and margin
Investment driving growth and margin ARR growth and organic operating margin Progression over last two years Sales and Marketing £756m (FY21: £698m) 41% ARR growth +4% +8% +10% +12% as % of recurring revenue Organic operating Research and Development £295m 20.2% 19.9% 19.9% margin 18.8% (FY21: £274m
Slide 16: Strong cash generation
Strong cash generation 107% Underlying cash conversion +36 (40) +51 (22) 402 (107) 377 295 See appendix for definitions © 2022 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 1.6x £733m £1.3bn • Net debt leverage of 1.6x following £600m share buyback and £272m net spend on acquisitions and disposals – now within medium term target range of 1-2x, with flexibility to move outside the range as business
Slide 18: Outlook
Outlook • For FY23, we expect: ̶ Organic recurring revenue growth to be ahead of last year. ̶ Other revenue (SSRS) to continue to decline, in line with our strategy. • Operating margins are expected to trend upwards in FY23 and beyond, as we focus on efficiently scaling the Group. © 2022 The Sage Gr
Slide 20: Consistent strong strategic progress
Consistent strong strategic progress Transforming Growing Sage Business Cloud penetration Group ARR (and growth) 75% £2.0bn 61% 67% £1.7bn £1.8bn £1.6bn 51% +8% +12% +5% FY19 FY20 FY21 FY22 Driving growth FY19 FY20 FY21 FY22 through innovation Investing Innovating R&D spend (and % of recurring reven
Slide 21: 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 22: Delivering on our stakeholder promises
Delivering on our stakeholder promises Customers Colleagues Society Shareholders We build every experience We are committed to We tackle digital inequality, We target sustainable with human insight people, driven by economic inequality and the growth in and ingenuity innovation, energising climate c
Slide 23: Focusing on our customers
Focusing on our customers Many SMBs are facing near-term macroeconomic challenges Impact of inflation is currently their biggest concern. SMBs are agile and quick to adapt Investment in technology remains a priority. Our solutions drive higher productivity and lower costs We provide our customers wi
Slide 24: Driving growth through the digital network
Driving growth through the digital network Our customers Smart Transactions Suppliers Service Smart Transactions Service Buyers Collaboration Collaboration Service Service Payments Payments Out Acceptance Service Service Collaboration Service Banking Service Compliance Service Accountants Financial
Slide 25: Scale Sage Intacct
Strategic priority 1 Scale Sage Intacct Accelerate the expansion of Sage Intacct in existing and new markets Progress update • Delivered strong growth supported by continued investment in core product, sales and distribution. • Expanded reach, including Brightpearl acquisition and launch of Sage Int
Slide 26: Expand medium beyond financials
Strategic priority 2 Expand medium beyond financials Broaden the value proposition for mid-sized businesses Progress update • Developed embedded AI-driven automated accounts payable processing. • Launched Sage People Payroll in the US and UK. “ “The move to Sage Intacct has been a huge turning point
Slide 27: 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 • Continued growth from UK small business solutions. • Strong focus on accountants: launched Sage for Accountants in the UK, attracting over 2,000 pra
Slide 28: Scale the network
Strategic priority 4 Scale the network Increase participation in the digital network and accelerate the network effect Progress update • Enabling more digital network participation by rapidly growing Sage Business Cloud. • Recent product launches include Sage Active in France, Sage Accounting in Spa
Slide 29: Learn and disrupt
Strategic priority 5 Learn and disrupt Build innovative solutions underpinned by a culture of continuous learning and disruption Progress update • Partnered with Microsoft to simplify collaboration workflows in Sage Intacct and Sage People. • AI-driven Outlier detection engine now live with over 1,0
Slide 33: Building ARR
Building ARR Opening ARR1 100% £1.82bn Existing Churn customers Migration and expansion Renewal by value 101% £1.84bn New New customer +£180m customers acquisition ARR Closing ARR 112% £2.03bn 1. As at the end of the comparative period (30 September 2021), stated on an organic basis at period end ex
Slide 34: Bridge from underlying to organic
Bridge from underlying to organic ARR Recurring revenue Total revenue Operating profit £m FY22 Growth FY22 Growth FY22 Growth FY22 Growth Underlying 2,057 +12% 1,845 +7% 1,949 +4% 377 +2% Acquisitions1 (30) (17) (18) 7 Disposals2 - (4) (7) (1) Organic 2,027 +12% 1,824 +9% 1,924 +6% 383 +8% 1. Bright
Slide 35: Sage Business Cloud portfolio
Sage Business Cloud portfolio Cloud Connected Cloud Native Accounting and Financials People and Payroll Mid-sized • Sage 200cloud • Sage Intacct • Sage People • Sage X3 businesses Small • Sage 50cloud • Sage Accounting • Sage HR businesses • Sage 50 Payroll • Sage Payroll Sage Digital Network © 2022
Slide 36: 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 © 2022 The
Slide 37: Sustainability highlights
Sustainability highlights Protect the Planet Tech for Good Fuel for Business ESG Fundamentals • Pledged to achieve net zero • Tackling digital inequality • Tackling economic People by 2040 and to halve our for innovation, enterprise inequality by supporting • 41% of senior leaders1 are emissions by
Slide 38: 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 39: 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 capex (excluding business comb
Slide 40: 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 contracts customer being unable to continue to benefit from the full functionality of the good or service witho
Slide 41: 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

The Sage Group — FY2022 Earnings Presentation on 6ix

Sage — The Sage Group — FY2022 Earnings Presentation

Slide 1: Sage Full-Year Results

Slide 2: Important notice

Slide 3: Steve Hare, CEO: Overview

Slide 4: Strong execution accelerates growth

Slide 5: Jacqui Cartin, Group Financial Controller

Slide 6: FY22 financial highlights

Slide 7: Growth drivers

Slide 8: P&L summary

Slide 9: Revenue bridge

Slide 10: Revenue categories

Slide 11: Portfolio view of recurring revenue

Slide 12: North America

Slide 13: Northern Europe

Slide 14: International

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: Strategic update

Slide 20: Consistent strong strategic progress

Slide 21: Strategic framework for growth

Slide 22: Delivering on our stakeholder promises

Slide 23: Focusing on our customers

Slide 24: Driving growth through the digital network

Slide 25: Scale Sage Intacct

Slide 26: Expand medium beyond financials

Slide 27: Build the small business engine

Slide 28: Scale the network

Slide 29: Learn and disrupt

Slide 30: Key messages

Slide 31: Q&A

Slide 32: Appendix

Slide 33: Building ARR

Slide 34: Bridge from underlying to organic

Slide 35: Sage Business Cloud portfolio

Slide 36: Capital allocation

Slide 37: Sustainability highlights

Slide 38: Glossary

Slide 39: Glossary

Slide 40: Glossary

Slide 41: About Sage