Sage : Full Year 2020 Results factsheet

FY20 Investor factsheet

Overview and financial performance

About Sage

Sage is the global market leader for technology that provides small and medium sized businesses with the visibility, flexibility and efficiency to manage finances, operations and people. With our partners, Sage is trusted by millions of customers worldwide to deliver the best cloud technology and support.

Meet the team	Investment case
	High quality recurring revenue growth
	FY20: 5% growth in ARR to £1.6bn, with 90% recurring revenue
	Efficient capital allocation
	Investing efficiently for growth. FY20: 22.1% organic operating margin

Strong free cash flow

FY20: underlying cash conversion of 123%

Steve Hare	Jonathan Howell	Resilient balance sheet
CEO	CFO	FY20: 0.3x net debt to EBITDA, with £1.2bn of cash and available liquidity

Total addressable market

• Sage's total addressable market is worth $33bn including 69m businesses
• The market is growing at 5% with cloud spend increasing by 11%

$33bn	$35bn
		+11%
$17bn	$19bn	Cloud
5%
		Total market growth
$16bn	$16bn			Cloud
				On-premise
2021	2022			Source: IDC, July 2020

Our global reach

Sage serves millions of customers around the world:

		Northern Europe
North America	UK & Ireland	Central &
22%	Southern Europe
	USA		France
39%	Canada	of revenue	31%	Iberia
		Central Europe
of revenue			of revenue

International	8%
South Africa
of revenue
Australia

Revenue categories

In FY20 Sage achieved organic total revenue of £1,768m, as follows:

• Recurring revenue of £1,592m, including software subscription and other recurring revenue (i.e. maintenance & support from on-plan customers)
• Other revenue of £176m, including mainly licences and professional services
• Over time, subscription will continue to grow within the revenue mix, while other revenue will continue to decline, in line with our strategy

£1,768m +3.7%

Portfolio view of recurring revenue

• Sage Business Cloud is a portfolio of unified cloud native and cloud connected solutions for small and medium sized businesses
• Sage continues to migrate existing customers and attract new customers to Sage Business Cloud, which added £200m of revenue in FY20
• Management are considering value creation paths, including disposals, for 'Non-Sage Business Cloud' products and solutions

£1,592m +8.5%

Software	£947m
subscription
Other	£521m
recurring
Other revenue	£237m
	FY19

£1,141m

£451m

£176m

FY20

+21% +8.5%

Recurring

Revenue

-13% Subscription penetration

-26%65%

Cloud native	£172m
Cloud connected	£480m

To be migrated

£634m

Non-Sage£182m

Business Cloud

FY19

	£222m		+£200m
	£636m		Added to Sage
		Business Cloud
	£557m	Sage
			Business Cloud
	£177m	penetration
	61%
	FY20

Financial performance	FY20	FY19	Growth
Organic recurring revenue	£1,592m	£1,468m	+8%
Organic total revenue	£1,768m	£1,705m	+4%
Organic operating profit	£391m	£406m	-4%
Organic operating margin %	22.1%	23.8%	-1.7 ppts

FY21 guidance

• Against the uncertain economic backdrop, we expect: ̶Organic recurring revenue growth in the region of 3% to 5% ̶Other revenue to continue to decline in line with strategy

̶Organic operating margin up to 3 percentage points below FY20, reflecting additional investment in the business

• Looking beyond FY21, we expect margins to trend upwards over time

Sage Investor Relations | [e-mail] | [phone] | [phone]

FY20 Investor factsheet

Purpose, vision and strategy

Sage's Purpose

To transform the way people think and work so their organizations can thrive

Sage's Vision

To become a great SaaS company for customers and colleagues alike

Strategy

Customer success	Colleague success	Innovation
Taking a customer-centric	Culture that values individuals	Solutions that delight customers and
approach to everything we do	and encourages collaboration	transform how they think and work

Sage Business Cloud portfolio

Sage is investing significantly in innovation. In FY20 Sage launched Sage Accounting Plus (for professional users), expanded Sage Intacct into new geographies, and integrated new services & features across the portfolio.

Cloud Connected			Cloud Native
	Accounting & Financials		People & Payroll
	Sage X3	Sage Intacct		Sage People
	Sage 200 Cloud
MEDIUM
	Sage 50 Cloud	Sage Accounting	CakeHR
	Sage 50 Payroll	Sage Payroll
SMALL
			Sage Service Fabric

Enabling digital networks

Sage Business Cloud solutions provide a digital environment for Finance and People professionals, composed of platforms, applications and services, where it is easy to connect, collaborate and do business.

SAGE ID & NETWORK	SAGE DESIGN SYSTEM
Common tools for	Network of people	Cross-channel	Cross-device
common tasks	& organisations	experience	experience
	MARKETPLACE
APPLICATIONS	SERVICE FABRIC

SAGE FINANCE & PEOPLE PLATFORMS

How Sage builds ARR

• Sage increased ARR by 5% to £1.6bn in FY20
• Sage seeks to minimise churn and deliver increased value to existing customers, reactivate off-plan customers and attract new customers

	Opening ARR1	100%	£1.54bn
		Churn
Existing	Migration, upsell & cross-sell
customers	Renewal by value	99%	£1.52bn
		Reactivations
	New customer acquisition
New
customers	Closing ARR	105%	£1.61bn

1. Annualised Recurring Revenue as at 30 September 2019

Strategic priorities for FY21 and beyond

Sage Business		Winning in our		Embedding SaaS
Cloud powered by
Cloud Native		target markets		capability & culture

• Sage Business Cloud adoption and growth remains our key priority
• We are focused on accelerating cloud native (fully hosted) solutions, supporting customers in their digital transformation journeys
• We are implementing plans to strengthen and build our business in order to win in our target markets across the Group
• We are committed to further embedding SaaS capabilities, based on a customer-centric,fast-paced and inclusive culture

Sage will make additional investment in sales & marketing and

product development in FY21 to drive growth, resulting in a planned reduction in organic operating margin of up to 3 percentage points

Capital allocation priorities

1	2	3	4
Organic	M&A and portfolio	Maintain the	Additional
investment	rationalisation	ordinary dividend	returns
		in real terms

Broad range of 1.0x - 2.0x net debt to EBITDA over the medium term

Sage Investor Relations | [e-mail] | [phone] | [phone]