Results Sage Image credit Pixabay/GeraltSage has announced its fiscal Q1 2023 results. They did little to assuage the stock market, and the share price continued a gradual fall over the last few days though it still ended higher than it was a month ago at £42.55, up 9.21% over the month, down 3.16% on the day. The results were good, though boosted by the currency exchange rate between the US Dollar and sterling.

  • Total revenue was £540 million, up 10% year over year.
  • Recurring revenue rose 12% to £517 million
  • Subscription revenue was £422 million, up 18% and now 78% of revenue
Jonathan Howell, CFO Sage (Image credit Linkedin)
Jonathan Howell, CFO Sage

Jonathan Howell, Chief Financial Officer, commented: “Sage has made a strong start to the year, in line with our expectations, as Sage Business Cloud solutions help more customers improve their productivity and resilience. While we are mindful of the current macroeconomic environment, we remain confident in our strategy for delivering efficient growth, and we reiterate our guidance for the full year, as set out in our FY22 results announcement.”

Regionally UKIA and North America performed well, with Europe growing only 3% to £131, which raises some concerns about inflation running at a higher rate. North America, powered by Sage Intacct, grew 18% to £235 million, and UKIA was up 12% to £151 million. These figures were organic growth as acquisitions during 2022 have also had an impact. The underlying organic growth in Europe was higher at 6% after Sage divested its Swiss business unit.

Is Europe’s growth about to accelerate?

Howell was positive about the prospects in Europe during the analyst call. While Sage has been thinning down its European organisation over the last few years, the retrenchment to core locations is about to change. Sage Intacct has been the growth engine in the US, but the solution is now seeing traction elsewhere, as Howell explained.

He commented, “The bedrock of the Sage Intacct portfolio and customer bases is the US where it originated. Two years or so ago, we introduced Intacct into the UK and South Africa. Those numbers back then, two years ago, were obviously non-material, and it was early days. The pickup has been very good. The partner channel in the UK have really taken hold of this product, they like it. They are identifying customers for whom it’s giving real benefits. We’re seeing a good acceleration in the UK and South Africa in Sage Intact.

“The other thing about Sage Intact to bear in mind is we’ve launched Sage Intacct right at the end of last year in France. We’ve got Sage Intact Manufacturing now in France as well. And we’ve got Sage Active in France. Those are all our state-of-the-art, best cloud-native products, which are going into continental Europe for the first time. That again gives us confidence about the longevity of the growth that we can achieve in the cloud later portfolio.”

Howell is confident that the return to above-inflation growth is coming in Europe. It may take a little while as the new solutions need to build traction.

Howell also revealed that Sage Intacct is growing at a rate of  30% in North America and has a renewal rate of 108-110%.

Powering future growth

The expansion of the Sage Intacct portfolio and Sage Active are solutions that will power the medium-term growth of Sage. However, in the short term, Howell indicated that solutions from acquisitions such as Lockstep, the AR and AP automation vendor and Brightpearl, the retail operations vendor, will also help accelerate growth. The Brightpearl integration with Sage Intacct has taken some time to formally come to market but is expected this year.

Will Sage cut jobs like everyone

This was a solid set of results from Sage when many of the larger SaaS firms were laying off staff. Whilst Howell did not reveal Sage would make any job losses, he said, “About two-thirds of our cost base is people and people-related costs. And therefore, at the beginning of this year, we’ve set out a plan. We put through what we consider to be appropriate increases for our colleagues around the world.”

The inference is that Sage, which made cuts of around 800 jobs in 2021, is looking to recruit staff over the next year. It indicates that Sage sorted its cost base earlier than many other firms and is perhaps in a better position to accelerate growth than other vendors. The caveat is that Howell did not state there would no job losses, just that they had a plan to expand. As the Sage leadership has shown over recent years, they are not afraid of making the tough cost savings decisions as soon as they feel they need to.

Enterprise Times: What does it mean

This is another solid set of results from Sage, and with Howell revealing that the growth rate of Sage Intacct is around 30%, it looks Sage is well positioned. Howell also showed confidence that the economic climate is not impacting revenues at the moment, but that may change if a recession hits and there are increasing job losses and business failures.

Under Steve Hare, Sage has contracted down to a solid core built around the Sage Business Cloud, and that work is almost complete. It is now ready to start a phase of expansion with its core products, such as Sage Intacct, finally offering foreign language versions. The emergence of Sage Intacct Manufacturing also offers a potential replacement for Sage X3; Sage Intacct Construction and Real Estate offer a cloud-based update for Sage CRE, and with Sage Intacct Retail (Brightpearl), Sage will also have the retail market covered.

While these are a lot of industries for Sage to focus on, Aaron Harris has driven the building of a common architecture, the Sage Digital Network, which means many of the Sage solutions can support one another in the future, rather than the historical, disparate set of solutions it once had.

LEAVE A REPLY

Please enter your comment!
Please enter your name here