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• Total Revenue Growth: 9% increase.

• Operating Profit Margin: Increased to 23.2%, an expansion of 140 basis points.

• Earnings Per Share (EPS): Increased by 17% to 20.8p.

• Cash Conversion: 115%.

• Annual Recurring Revenue (ARR): Increased by GBP240 million to GBP2.5 billion, up 11%.

• Operating Profit: Grew by 16% to GBP288 million.

• Profit After Tax: Increased by 15% to GBP206 million.

• Interim Dividend: Increased to 7.45p, up 7%.

• Sage Business Cloud Revenue: Increased by 13%.

• Cloud Native Revenue: Increased by 22%.

• Subscription Penetration: 83%.

• North America Revenue Growth: 11%.

• UKIA Revenue Growth: 9%.

• Europe Revenue Growth: 8%.

• Cash from Underlying Operations: GBP330 million.

• Free Cash Flow: GBP246 million.

• Leverage Ratio: 1.5.

• Share Buyback Program Extension: GBP200 million.

• Warning! GuruFocus has detected 6 Warning Sign with SGGEF.

Release Date: May 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sage Group (The) PLC (SGGEF) achieved a total revenue growth of 9%, reflecting the strength of its subscription-based model.

• Operating profit margin increased to 23.2%, an expansion of 140 basis points, leading to a strong increase in EPS of 17%.

• The company delivered cash conversion of 115%, driven by growth in subscription revenue and effective working capital management.

• Sage Business Cloud revenue increased by 13%, with cloud native revenue growing by 22%, driven by strong customer acquisition.

• Sage Intacct showed significant growth, particularly in the UK, with revenue increasing by over 60% in the region.

Negative Points

• Macroeconomic conditions remain volatile and uncertain, posing potential risks to future growth.

• Despite strong performance, the company maintained a cautious outlook for the full year due to economic uncertainties.

• Recurring revenue growth decelerated to around 9% in the second quarter, slightly below expectations.

• The competitive environment, particularly with Intuit's enterprise suite, remains a concern, although no significant impact has been observed yet.

• There is a potential risk of divergence between ARR and recurring revenue growth due to timing differences in revenue recognition.

Q & A Highlights

Q: Could you elaborate on the guidance for the full year, especially given the 9% growth in H1 amidst uncertain macro conditions? A: Jonathan Howell, CFO, stated that the full-year guidance remains at 9% or above, consistent with previous guidance. Despite macroeconomic volatility, the company has strong momentum with an ARR growth of 11%, a solid sales pipeline, and improved sales execution, which supports their confidence in achieving the guidance.