Q3 21 was a satisfactory quarter with organic recurring revenue up 6.1%. Cloud native revenue grew significantly (+37% vs +30% in H1 21) thanks to Sage Intacct, Sage Accounting in the UK, Sage People, AutoEntry and the migration from cloud connected software to cloud native solutions. Consequently, organic recurring revenue growth accelerated in 9m21 (+5%) vs H1 21 (+4.4%). By geography, North America was the best performer. 2021 guidance was revised upwards at the top line.
Companies: Sage Group plc
H1 20/21 was good with organic recurring revenue growth of 4.4%. Growth was sustained by software subscriptions (+11%). Sage Business Cloud revenue increased to 65% of the total. The renewal rate by value stabilised (97%) vs Q1 20/21 and H2 19/20 and the churn was in line with pre-COVID-19 levels which are reassuring. The organic operating margin decreased to 20.2% of revenue (-3pts) due to higher spendings in sales & marketing and R&D as expected. 2020/21 guidance is unchanged.
Looking Ahead At The Next Week
Sage Group released a good set of Q1 20/21 figures with organic recurring revenue growth of 4.7% in line with the full-year guidance (+3-5%). This performance was spread out across various cloud native software and essentially driven by the gain of new customers. Lastly, no deterioration in the churn rate is reassuring considering the continuing tough market conditions. All in all, Sage Group confirmed FY2020/21 guidance.
In FY2019/20, organic recurring revenue growth (+8.5% despite a negative impact from COVID-19 in H2 19/20) and the organic operating margin (22.1% of revenue) were in line with guidance. The big disappointment was on 2020/21 guidance for the operating margin (up to 3pts below the FY2019/20 level depending on the amount of additional investments), the result of a significant slowdown in organic recurring revenue growth (+3-5% anticipated) and the acceleration in R&D to increase the cloud native g
In Q3 19/20 (April-June 20), organic recurring revenue growth slowed significantly (+6.5% vs +10.3% in H1 19/20) but was less than expected. In particular, the customer churn was below the group’s anticipation. Conversely, the drop in SSRS & Processing revenue (-34.8% vs -19.6% in H1 19/20) was attributable to lower licence and services revenue. FY2019/20 guidance is favourable with organic recurring revenue growth of +7-8%, a decrease in SSRS & Processing revenue and an organic operating margin
Sage Group had a good H1 19/20 with a limited impact from the Coronavirus pandemic. Organic recurring revenue continued to grow rapidly (+10.3%) thanks to strong software subscription growth (+26% vs +27.7% in H1 18/19). The operating margin which was impacted by a provision for bad debt (£13m) represented 22.8% of revenue (-0.6pt), above the consensus (22%). H2 19/20 looks tricky. In April 2020, the gain of new customers was half the level expected and the churn rate increased slightly.
Sage Group had a good start to FY2019/20. Total organic revenue increased by +6.7% while organic recurring revenue grew significantly (+10.7% vs +10.5% in Q1 18/19) thanks to the migration of existing customers to subscription and the cloud, the reactivation of customers and the gain of new clients. As in 2018/19, North America and the UK/Ireland were the most dynamic geographic areas. Guidance for FY2019/20 is confirmed.
In 2018/19, the organic recurring revenue increased by +10.8% thanks to higher software subscriptions (+29%) which outpaced the reduction in maintenance revenue (-12%) resulting from the migration of customers to software subscription. The transformation to a SaaS model also led to lower organic SSRS (-18%). Lastly, the organic operating margin was down to 23.7% of revenue (-5.1pt). These characteristics should continue in 2019/20.
Organic revenue growth slowed in Q3 18/19 (+5.3% vs +6.2% in H1 18/19) due to the acceleration of the decrease in Software and Software related services (SSRS) attributable to lower X3 licences and services than expected. Therefore, the organic operating margin should be in the low range of previous guidance (23-25% of revenue).
In H1 18/19, organic revenue growth (+6.2%) was attributable to the continuing strong development of subscriptions (+27.7%) which more than offset lower maintenance and support revenue (-10%) and the decrease in SSRS revenue (-11.8%) due to lower licence revenue. The organic operating margin decreased by 1.6pt to 23.2% of revenue taking into account higher investment to accelerate growth and a higher bonus provision in line with the business development. Lastly, 2019 guidance is globally unchang
Sage Group posted rather good business development in Q1 18/19. Organic revenue grew by +7.6% and was sustained by strong recurring revenue growth of +10.5% (vs +7% in Q1 17/18). Although this has to be tempered by the favourable comparative yoy, it is a good start to FY2018/19.
Sage Group entered into an agreement to sell Sage Payroll Solutions in the US to iSolved which is specialised in Human Capital Management solutions. In FY2017/18, Sage Payroll Solutions had revenue of £38m and an operating loss of £-1m. We believe that the consideration price of £78m, which corresponds to a P/Sales multiple of c.2x, is a fair price.
The 2017/18 organic revenue and operating margin were broadly in line with expectations including the contribution of the Sage Payroll solutions for sale in the US. Sage Group, headed by new CEO Steve Hare, ex-CFO, is resolutely focused on accelerating the transformation to SaaS (2018/19 organic recurring revenue growth of +8-9% vs +6.7% in 2017/18). This strategy requires substantial investments (£60m estimated in 2018/19) which should weigh on the organic operating margin (23-25% of revenue es
Sage Group announced that the board of directors and Group CEO Stephen Kelly have come to an agreement and the latter has stepped down. He remains available to the group until he leaves on 31 May 2019. Indeed, it is a surprise and bad news.
The positive is that Steve Hare, Group CFO, has been appointed interim Chief Operating Officer and will continue his primary function of CFO. He will have full executive authority to run the business until a new CEO is appointed.
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