Sage Group Plc · LSE:SGE
Sage — FY2021 Earnings Presentation
42 slides from Sage's earnings presentation, Nov 17, 2021
Slide 1: Sage Full-Year Results
Sage Full-Year Results For the year ended 30 September 2021 17 November 2021 NewsCafe, South Africa, Sage Payroll Cloud
Slide 2: Safe harbour
Safe harbour The following presentation is being made only to, and is only directed at, persons to whom such activities; the competitive environment; our ability to adapt to technological change; business presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevan
Slide 3: Steve Hare, CEO: Overview
Steve Hare CEO ❑ Overview ❑ Financial review ❑ Strategic update and outlook ❑ Q&A Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 3
Slide 4: Key messages
Key messages Performance Progress Priorities Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 4
Slide 5: Jonathan Howell, CFO: Financial review
Jonathan Howell CFO ❑ Overview ❑ Financial review ❑ Strategic update and outlook ❑ Q&A Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 5
Slide 6: FY21 Financial highlights
FY21 Financial highlights High quality recurring On-target Strong cash revenue growth margin conversion 5.4% 19.3% 126% FY20: 8.4% FY20: 22.0% FY20: 123% Sage Group plc Full Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 6
Slide 7: Growth drivers
Growth drivers Cloud native ARR ARR growth Renewal by value growth 8% 44% 99% FY20: 5% FY20: 99% FY20: 26% Sage Group plc Full Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 7
Slide 8: P&L summary
P&L summary FY21 FY20 Change £m £m Total Organic Revenue £1,778m £1,725m +3% Recurring revenue £1,637m £1,553m +5% Organic operating profit £343m £380m -10% Organic operating profit margin % 19.3% 22.0% -2.7 ppts Underlying operating profit £358m £400m -11% Underlying operating profit margin % 19.4%
Slide 9: Revenue bridge
Revenue bridge Recurring revenue +£84m (+5%) +88 (56) (22) +74 (31) 1,778 1,725 Sage Business Cloud +£162m (+19%) Sage Group plc Full Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 9
Slide 10: Revenue categories
Revenue categories +3.1% £1,778m 92% Recurring £1,116m Software +11% revenue subscription £1,242m £1,637m penetration Recurring revenue +5% 70% Software £437m subscription Other recurring £395m -10% penetration Other (SSRS £172m and processing) £141m -18% FY20 FY21 Sage Group plc Full Year Results 2
Slide 11: Portfolio view of recurring revenue
Portfolio view of recurring revenue +5.4% £1,637m Cloud native £286m +35% £212m £623m Cloud connected £712m +14% £1,487m Future Sage Business 67% Sage Business Cloud Cloud penetration Opportunity +8% £547m To be migrated -10% £489m £172m Non-SBC £150m -12% FY20 FY21 Sage Group plc Full Year Results
Slide 12: North America
North America Sage Intacct Sage Business Cloud penetration • Recurring revenue growth of 22% FY20 71% • Continued strength in new customer acquisition +2 ppts FY21 73% US Software subscription penetration • Recurring revenue growth of 8% FY20 61% • Progress in Sage Intacct and continued growth in +5
Slide 13: Northern Europe
Northern Europe Recurring revenue growth of 4% Sage Business Cloud penetration • Sage Business Cloud penetration now at 86% FY20 82% • Reflects strong and accelerating growth in cloud +4 ppts FY21 86% native solutions • Supported by further growth in Sage 50 cloud connected Software subscription pen
Slide 14: International
International France Sage Business Cloud penetration • 5% recurring revenue growth FY20 35% • Strong performance in cloud connected products +12 ppts FY21 47% and further growth in cloud native solutions Software subscription penetration Central Europe FY20 56% • 6% recurring revenue growth, reflect
Slide 15: Strategic investment to drive growth
Strategic investment to drive growth Sales & marketing costs R&D costs as % of recurring revenue as % of recurring revenue £685m £268m 42% 16% +150bps1 +120bps1 1 FY21 year-on-year change Sage Group plc Full Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 15
Slide 16: Strong cash generation
Strong cash generation 126% Underlying cash conversion +65 (55) +36 (112) +47 451 358 339 See appendix for definitions Sage Group plc Full Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 16
Slide 17: Robust financial position
Robust financial position Net debt leverage Net debt Cash and liquidity 0.6x £247m £1.2bn • Returning £600m through share buyback programmes, of which £502m executed to date, reflecting proceeds from recent disposals • Dividend increased 2.5% in FY21 reflecting strong financial performance • Signifi
Slide 18: FY21 Financial highlights
FY21 Financial highlights High quality recurring On-target Strong cash revenue growth margin conversion 5.4% 19.3% 126% FY20: 8.4% FY20: 22.0% FY20: 123% Sage Group plc Full Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 18
Slide 19: Steve Hare, CEO: Strategic update and outlook
Steve Hare CEO ❑ Overview ❑ Financial review ❑ Strategic update and outlook ❑ Q&A Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 19
Slide 20: Strong strategic progress since FY18
Strong strategic progress since FY18 Moving customers to the cloud Growing through innovation Sage Business Cloud penetration Cloud native ARR (and growth) 67% £347m 60% 50% £240m £191m 31% £144m +33% +26% +44% FY18 FY19 FY20 FY21 Transforming FY18 FY19 FY20 FY21 Sage into a more Transforming our cu
Slide 21: Customer insights and trends
Customer insights and trends Our customers tell us what’s important to them today Accelerating Digital Adoption Streamlining business processes and serving customers in new ways Increasing Value of Data Learning more and growing faster with better analytics – with more control over data use Benefitt
Slide 22: Refreshed strategic framework for growth
Refreshed 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 En
Slide 23: Our ambition: to be the trusted network for SMBs
Our ambition: to be the trusted network for SMBs Sage’s digital network Customer benefits of Sage’s digital network • Efficiency – digital services that automate workflows and interactions between businesses • Business outcomes – helping customers overcome challenges and gain better insights • Trust
Slide 24: Our strategic flywheel
Our strategic flywheel The data opportunity for Sage Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 24
Slide 25: Scale Sage Intacct
Scale Sage Intacct Strategic priority 1 Accelerate the expansion of Sage Intacct in existing and new markets Progress in FY21 • Invested in sales & marketing and distribution • Record year for Sage Intacct, with more than 2,000 new customer wins (up >50% on prior year) Future focus Pete Tantillo, CF
Slide 26: Expand Medium beyond financials
Expand Medium beyond financials Strategic priority 2 Broaden the value proposition for mid-sized businesses Progress in FY21 • Sage Intacct Budgeting & Planning sales up 60% • Launched Sage Data & Analytics for Sage 100, Sage 300 & X3 Future focus Mette O’Connor, Controller at West Harbor Healthcare
Slide 27: Build the small business engine
Build the small business engine Strategic priority 3 Create a scalable digital ‘engine’ to acquire and serve small business customers Progress in FY21 • Invested in sales & marketing, eCommerce platform and solutions for accountants • New Sage Accounting customers up 80% in UK; strong growth in clou
Slide 28: Scale the network
Scale the network Strategic priority 4 Increase participation in Sage’s digital network and accelerate the network effect Progress in FY21 • More customers able to access the digital network; expanded the ecosystem with more ISV integrations • Launched new cloud native solutions in International Fut
Slide 29: Learn and disrupt
Learn and disrupt Strategic priority 5 Build innovative solutions underpinned by a culture of continuous learning and disruption Progress in FY21 • Enhanced digital services: bank reconciliations, e-invoicing and a new tax engine for Sage Accounting • Partnership with Tide for small business owners;
Slide 30: Our stakeholders
Our stakeholders Customers Colleagues Society Shareholders Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 30
Slide 31: Outlook
Outlook • For FY22 we expect: ̶ Recurring revenue growth in the region of 8% to 9%, driven by continuing strength in Sage Business Cloud, and in cloud native revenues in particular ̶ Other revenue (SSRS and processing) to continue to decline, in line with our strategy • Consistent with previous guid
Slide 32: Key messages
Key messages Performance Progress Priorities Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 32
Slide 33: Q&A
Q&A ❑ Overview ❑ Financial review ❑ Strategic update and outlook ❑ Q&A Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 33
Slide 34: Appendix
Appendix Sage Group plc Full-Year Results 2021 © 2021 The Sage Group plc, or its licensors. All rights reserved. 34
Slide 35: Building ARR
Building ARR Opening ARR1 100% £1.56bn Churn -£20m Existing customers Migration and Expansion ARR Renewal by value 99% £1.54bn New customers New customer acquisition2 +£140m ARR Closing ARR 108% £1.68bn 1. As at the end of the comparative period (30 September 2020), stated on an organic basis at per
Slide 36: Bridge from organic to underlying
Bridge from organic to underlying ARR Recurring revenue Total revenue Operating profit £m FY21 Growth FY21 Growth FY21 Growth FY21 Growth Organic 1,680 +8% 1,637 +5% 1,778 +3% 343 -10% Assets held for sale1 21 22 28 8 Organic (incl. assets held for sale) 1,701 +8% 1,659 +5% 1,806 +3% 351 -9% Disposa
Slide 37: Sage Business Cloud portfolio
Sage Business Cloud portfolio Cloud Connected Cloud Native Accounting & Financials People & Payroll Sage 200 Cloud Sage Intacct Sage People MEDIUM Sage 50 Cloud Sage HR Sage Accounting Sage 50 Payroll Sage Payroll SMALL Sage Service Fabric Sage Group plc Full-Year Results 2021 © 2021 The Sage Group
Slide 38: Capital allocation
Capital allocation Maintain the 1 Organic investment 2 M&A 3 dividend in real terms 4 Consider returning surplus 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 the business needs require
Slide 39: 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 40: Glossary
Glossary Measure/Description Free cash flow Free Cash Flow is Cash Flow from Operations 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 organic tot
Slide 41: Glossary
Glossary 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 functionality of the g
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 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 relati