Sage : Full Year 2022 factsheet

FY22 Investor factsheet

Overview and financial performance

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 relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology and experience to tackle digital inequality, economic inequality and the climate crisis.

Meet the team		Investment case
		• High quality recurring revenue
		12% growth in Annualised Recurring Revenue (ARR) to £2.0bn, with 95% recurring revenue
		• Investment driving growth andmargin
		19.9% organic operating margin
		• Strong free cash flow
		Underlying cash conversion of 107%
Steve Hare	Jonathan Howell	• Robust balance sheet
CEO	CFO	£1.3bn of cash and available liquidity

Our global reach

Sage serves millions of customers around the world:

North America
42%		Northern	Europe	International
		22%
of revenue			of revenue				36%
	USA							France
				UK			of revenue
	Canada			Ireland		Iberia
						Central		Europe
									Africa &		APAC

Revenue categories

In FY22 Sage achieved organic total revenue of £1,924m:

• Recurring revenue of £1,824m, including software subscription and other recurring revenue (i.e. maintenance & support)
• Other revenue of £100m, mainly professional services and licences
• Over time, subscription will continue to grow within the revenue mix, while other revenue will continue to decline, in line with our strategy

Software			+6%		£1,924m		Recurring
				£1,445m
£1,263m		+14%	revenue
subscription							£1,824m (+9%)
Other	£404m			-6%	75%
recurring		£379m
Other (SSRS)	£142m		£100m	-30%	subscription
	penetration
	FY21		FY22

How Sage builds ARR

• Sage increased ARR by 12% to £2.0bn in FY22
• Sage seeks to attract new customers to Sage Business Cloud, deliver increased value to existing customers and minimise churn

	OpeningARR1	100%	£1.82bn
Existing		Churn
customers	Migration and Expansion
	Renewalbyvalue	101%	£1.84bn
New	New customer	+£180m
customers	acquisition	ARR

ClosingARR 112% £2.03bn

1. Annualised recurring revenue as at 30 September 2021

Portfolio view of recurring revenue

• Sage Business Cloud is a portfolio of unified cloud native and cloud connected solutions for small and mid-sized businesses
• Sage continues to migrate existing customers and attract new customers to Sage Business Cloud, adding £242m of revenue in FY22
• Management are focused on value creation paths for 'Non-Sage Business Cloud' products and solutions

						£1,824m
Cloud				+9%
					£419m	+41%
£297m	Future Sage
native
								Business Cloud
Cloud		£722m			+17%	opportunity
connected		£842m	£1,683m (+11%)
To be	£495m				75%
migrated		£422m	-15%
								Sage Business
Non-SBC	£153m		£141m	-8%	Cloud
		FY21		FY22		penetration

Financial performance	FY22	FY21	Growth
Organic recurring revenue	£1,824m	£1,667m	+9%
Organic total revenue	£1,924m	£1,809m	+6%
Organic operating profit	£383m	£353m	+8%
Organic operating margin %	19.9%	19.5%	+0.4 ppts
Underlying basic EPS	23.8p	25.7p	+8%

FY23 Guidance

Organic recurring revenue growth

Other revenue

Operating margins

To be ahead of last year

To continue to decline, in line with strategy

Expected to trend upwards in FY23 and beyond, as we focus on scaling the Group

Sage Investor Relations | www.sage.com/investors | [e-mail]

FY22 Investor factsheet

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

Scale	Expand medium	Strategic priorities
Build the small business engine	Scale the network	Learn and disrupt
Sage Intacct	beyond financials

Customers	Colleagues	Stakeholders
Stakeholders	Society
		Values
Human	We do the right thing
Bold	Trust	Simplicity

Sage Business Cloud portfolio

Sage's cloud native and cloud connected solutions enable customers to be more productive, resilient and flexible.

	Cloud Connected	Cloud Native
	Accounting and Financials	People and Payroll
Mid-sized	Sage 200cloud	Sage Intacct	Sage People
businesses	Sage X3
Small	Sage 50cloud	Sage	Sage HR
businesses	Sage 50 Payroll	Accounting	Sage Payroll

Sage Digital Network

Sage's digital network

Our ambition is to be the trusted network for small and mid-sized businesses, delivering an integrated experience of digital and human connections. Sage's network facilitates the smooth flow of work and money between organisations and everyone they need to connect with.

Investment driving growth and margin

• Sage continues to invest in the business to accelerate growth
• We expect the level of spend to increase at a slower rate than revenue, resulting in margin trending upwards in FY23 and beyond

Progression over last two years

ARR growth

+4%

+8%

+10%

+12%

Organic

operating 20.2% 18.8% 19.9% 19.9% margin

H1 21

H2 21

H1 22

H2 22

Driving innovation and growth

Attracting more customers to the digital network means more network activity and therefore more data. Through artificial intelligence and machine learning, this powers the insights we need to build more innovative and compelling customer experiences, which in turn attracts more customers.

Our customers

Smart Transactions

Smart Transactions

Suppliers

Service

Service

Buyers

Collaboration

Collaboration

Service

Service

Payments

Payments Out

Acceptance

Service

Service

Collaboration

Service

Banking

Service

Compliance

Service

Financial Institutions

Accountants

Tax authorities

Strategic flywheel

More customers

Better customer		More network
experiences		activity

More data for

AI/ML development

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 - through verified digital identities and a shared ledger

Capital allocation priorities

		3. Grow the	4. Consider
1. Organic		returning
2. M&A	dividend
investment	surplus
	over time
		capital

We target a 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

Sage Investor Relations | www.sage.com/investors | [e-mail]