Sage issued its Q3 financial update this week. Total revenue was up 10% to £1,630 million, and recurring revenue rose 12% to £1,562 million as it continued to evolve the business to its cloud solutions. The company also revealed growth across all three of its regions: North America (up 15%, £702 million), UKIA (up 9%, £456 million) and Europe (up 8%, £404 million). Subscription revenues now account for 79% of the business, up 5% year over year.
Jonathan Howell, Chief Financial Officer, commented, “Sage has performed strongly throughout the first nine months, in line with our expectations, as we help small and mid-sized businesses become more productive and resilient. Sage continues to build strong momentum, driving the delivery of sustainable, efficient growth. Accordingly, we reiterate our guidance for the full year, as set out in our half-year results announcement.”
As usual, Sage did not break down the success of individual products, but it did highlight the success of Sage Intacct and cloud-connected products in North America. In UKIA, the growth was attributed to cloud-native small business solutions, Sage Intacct, and Sage 50 cloud. Despite the recent launch of Sage Intacct in Europe, it attributed the growth to Sage Business Cloud.
Howell did break this down further when questioned, noting. “Intacct North America is running at about 30%… Intacct and other cloud-native products running way in excess of 40% growth outside of the U.S.”
Sage looks forward with realism
While the results seem very positive, Sage acknowledged that the weakening of sterling against the US dollar has provided a boost, especially for the US growth. However, it did not specify the actual impact for this quarter.
Profitability is also improving, with Sage continuing to hone its business. It expects to maintain a 20.8% margin for the full year, but Howell noted in the analyst briefing, “we expect operating margins to trend upwards in FY ‘23 and beyond.”
Looking forward, Sage expects recurring revenue growth of around 11% and is not changing its guidance.
Enterprise Times: What does this mean?
Another solid set of results shows that Sage is successfully transitioning to a subscription-based business. While, newly launched products in Europe (Sage Intacct in France and Sage Active in France and Spain) are not yet making a significant contribution, as it ramps up the marketing and sales efforts that may change and bring further boosts in profits.
Quickbooks imminent exit from France may help with this. Sage has had a strong presence in France. Having acquired the Sage X3 business there, can it return to a dominant position in the country? It will still face strong competition from Method by Cegid, EBP, and with Visma purchasing inqom, the Nordic giant which is also poised to make an impact.
