Good morning, everyone. Welcome to the Q3 trading update call for The Sage Group plc. Your presenter today will be Jonathan Howell, Chief Financial Officer, who is joined by James Sandford, Head of Investor Relations. I would now like to hand the conference over to Mr. Howell. Please go ahead, Jonathan. Thank you very much. Good morning, everybody, and welcome to Sage's Q3 trading update. First, I'll run through the key numbers and the performance of the business. After that, we can open for Q&A. Just as a reminder, all numbers in the trading statement are on an organic basis. Sage performed strongly in the first nine months. We've delivered recurring revenue growth of 5% to over GBP 1.2 billion, supported by software subscription growth of 11% to GBP 920 million. This means subscription penetration increased to 69%, up from 64% last year. Regionally, North America grew recurring revenue by 7% to GBP 475 million, driven mainly by a good performance from Sage Intacct. In Northern Europe, recurring revenue grew by 4% to GBP 292 million. This reflects accelerating growth in Cloud Native solutions, including Sage Accounting, and also further growth in Sage 50cloud Connected. In the international region, recurring revenue also grew by 4% to GBP 454 million, with particular strength in Cloud Connected. Looking at the portfolio view, recurring revenue for the future Sage Business Cloud opportunity increased by 7% to over GBP 1.1 billion. This was underpinned by strong growth in Cloud Native revenue of 32% to GBP 205 million, mainly through new customer acquisition and supported by migrations to both Cloud Native and Cloud Connected solutions. As a result, Sage Business Cloud penetration increased to 66%, which is up from 60% last year. Finally, recurring revenue in the other portfolio was down by 11%, in line with our strategy. Moving on to the third quarter. Recurring revenue grew by 6% to GBP 409 million, driven principally by an acceleration in Cloud Native growth of 37%, together with continued growth in Cloud Connected. This was strengthened by our program of additional strategic investment in sales, marketing, and innovation. Turning to other revenue. This decreased by 18% to GBP 109 million, in line with expectations. As a result, total revenue grew by 2.6% to over GBP 1.3 billion. For Q3, this growth was 5% to GBP 440 million. Finishing on the outlook. Following a strong performance in the third quarter, we now expect full-year recurring revenue growth to be slightly above our previous guidance range of 3%-5%. The group's guidance across all other metrics remains unchanged. To summarize, we've delivered a strong performance in the first nine months as momentum in the business continues to strengthen. Thank you. Now let's open for questions. Thank you. We will now begin the question and answer session. To ask a question over the audio, kindly, press star one on your telephone keypad and wait for your name to be announced. To cancel your request, kindly press the hash key. Once again, star one if you have any questions. Question is from the line of Adam Wood from Morgan Stanley. You may ask your questions. Question. I've got two, please. First of all, obviously, another nice little raise in the guidance for the full year. I wonder if you could just talk about what you're seeing there as well. I imagine the business was running a little bit better than expected in the third quarter, because you also, more importantly, talk about what you're seeing on the leading indicators, particularly around any kind of qualitative comments on ARR. What are you seeing on new customer additions there? Could you give us a feel for what you think the run rate might be at the end of the year on that metric? Then secondly, again, another nice acceleration in the Cloud-Native business. Could you talk there what's happening in terms of the different products contributing to that? And maybe specifically on Intacct, where you're seeing the migrations from in that business. Thank you. Adam, thanks very much indeed. First of all, as you say, this is a very consistent performance with what we reported for the first half. The lines of the business that were doing well at the first half stage have continued to do well during the course of Q3, and effectively, all we're seeing is a moving forward of the numbers by another three months. We've slightly outperformed our expectations, and as you can see, in the year to date, recurring revenue grew at 5% for the full nine-month period. For Q3 standalone, we grew at 6.1%. To answer the question around ARR progression, which is the lead indicator, at the first half stage, we indicated that we wereat the bottom of the decline in the growth of ARR. So we reported 4.2% ARR growth at the first half stage. What we're seeing now, as we expected and as we signaled, is an acceleration in ARR growth. Just to give you a sort of a feel, if we're raising our full year guidance for the year, which we are, to slightly above the 3%-5% range, then as you would expect, ARR as the leading indicator, will exit FY 2021 at a faster growth rate than that. Just to give a little bit more color on sequential growth. We are seeing sequential growth now. As you can see at the Q3 stage, on a constant currency basis for recurring revenue, sequential growth was about 2%. Q2 is about 1%, and Q1 it was about 1% as well. In sequential growth in recurring revenue, we're seeing an increase there that is almost double what we were seeing at the first half stage. In terms of products, it's the same products that we reported on that are driving this growth. Cloud Native grew at 32% during the nine-month period. The principal driver of that is Sage Intacct in terms of volume and value in the U.S., but very strong additions coming in Sage Accounting, particularly in the U.K., Sage People, AutoEntry, and Sage HR. All of those are continuing to grow and to accelerate in terms of the growth rate. Just to put in context, as you know, Intacct, we reported in the U.S., grew at 19% at the half year stage. It is now growing faster than that. Importantly, the other portfolio of Cloud Native products, in order to get to a 32% growth rate, are therefore growing considerably faster than Sage Intacct. All in all, we see a firm upwards trajectory in the growth rate of Cloud Native. Thank you, Adam. That's very helpful. Thank you very much. Thank you. Our next question is from the line of Ben Castillo from Exane BNP Paribas. Your line is now open. Hi, good morning. Thanks for taking my question. Question following on from the last on the trajectory you expect in H2, your expectations for a continued sequential acceleration like you've seen Q3 over Q2 and Q1, or a sort of plateauing there? Second question would be, could you just recap the expansion of the Sage Partner Cloud announced last week? What that will enable? What are your sort of future plans and expectations, particularly in regard to sort of hyperscale infrastructure? I think Azure was mentioned in that press release. Lastly, if we could just touch on margins, how you're thinking about the trade-off between your discretionary marketing spend for the rest of this year and into 2022, given the solid results you've seen so far this year, and how you're thinking about that. Thank you. Yes, thanks very much. First of all, on sort of more color on growth rates into the second half. We've given clear guidance for the full year. We're moving into the last quarter, so it's just sort of fine-tuning at this stage. I think one additional bit of color is on ARR growth. We don't report ARR at the Q1 or the Q3 stage, only at the half year and the full year. I can give you a sort of a bit of color. Sequentially in Q3, it grew at 2.5%, sequentially Q2 2%, and sequentially Q1 1%. That's just drawing out the trend line that we described at the half year stage. Just putting a few little proof points on that. Sage Partner Cloud, yes, that's an important development for us in our major territories, France, U.K., and North America in particular, taking the old BMS franchise and moving that into a hosted environment, either managed by Sage ourselves or one of our major partners. It has started well in Europe. The uptake is now just beginning to come through as well in North America. I'd put some color on the sort of the migrations from Cloud Connected, this is effectively sort of Sage 200 and other products, into Cloud Native. Of that growth of 32% that you see at the nine-month stage in Cloud Native, about a quarter of it comes from migrations. Some of that is Sage Partner Cloud. Some of that is moving to Sage HR, which is our Cloud Native HR solution. Some of it is also, as reported, although not too material at this stage, is movement from Sage 50cloud Connected to Intacct, where we're seeing that beginning to happen in the U.K. and North America. Then your last question around margin. As revenue growth is ramping in the second half, therefore our speed of spend is also ramping to sort of fall in line with the guidance that we set at the beginning of the year, which we reiterated at the first half stage, and we're now reiterating at Q3. A very consistent story is that we anticipate that this additional spend will move the margin up to 3 percentage points lower than where we were at the end of FY 2020. Again, it's going to exactly the same places that we highlighted at H1, which is product and R&D, and also sales and marketing. Those have been the big beneficiaries of the increased investment. You can see the acceleration in Cloud Native NCA and upsell and cross-sell which we've reported today. Thank you. Thanks very much. Our next question is from the line of Will Wallis from Numis. Good morning. Thank you. I want to ask a quick question about the growth rates. Are there any sort of base effects in there? For example, on a year-on-year basis, when you're looking back a year, had you been giving anyone discounts, for example, in the recurring revenue line, that means that there's been a sort of one-off improvement that's sort of not sustainable as you've moved back to normal pricing? That's a question both on the year-on-year basis and also if you're looking at your ARR for the Q3 versus Q2, that 2.5% growth rate sounds very impressive. Is there any sort of base effect there as well? Yes. Thank you, Will. Good question. I think there are just two things to be aware of in terms of sort of year-on-year comparators. One was, if you recall, Q3 last year was the first quarter that we operated in post the beginning of the lockdowns in our major territories. If you recall that in April last year, we reported that NCA levels were running at about 60% of what they were on a pre-COVID basis. The first month at least of this quarter was severely impacted by the advent of lockdowns and government restrictions in relation to COVID. If you recall, by the end of the year, by the end of last financial year, we reported that our NCA levels were at about 80%-90% of what they'd been on the pre-COVID basis. A very rapid recovery during the course of last year's second half. In that context, it is a slightly weaker quarter that we've got as a comparator in Q3 last year. I'd hasten to add it was still nonetheless quite strong. We've just reported a 6.1% recurring revenue growth, in Q3 this year, it was 6.5% last year. The overall growth rates were not too dissimilar. The big difference was the growth rate at this stage last year was declining. The growth rate this year is clearly accelerating. A little bit of an impact on comparators being lapped, but not too much. Then secondly, in terms of pricing, this has been a year of very few price increases across the whole portfolio, a modest impact. There'll be one or two isolated areas. For instance, in the U.K., we had unwind of pricing discounts, which had an impact. If you take the whole portfolio across the whole group, a very, very limited impact from pricing during the course of this year. That should not be factored into the thinking. Just to sort of come back on that, did you give any sort of payment holidays to any of your customers at the beginning of the pandemic, which have now effectively gone away because the customers are still there and now paying properly, and therefore that's helping the growth rate? It's probably worthwhile just updating the commentary on that. If you recall, at Q3 last year, full year last year, and H1 this year, again, it was a very consistent story. We were offering our customers payment holidays or deferred credit terms on a case-by-case basis where we think that would make a real beneficial impact to a customer, and was something that we wanted to do. The uptake on that was very low across our customer base. I can continue to report that the uptake is still very low and the impact on the reported numbers last year and this year is completely not material. Great. Thank you. Our next question is from the line of Stacy Pollard from JP Morgan. Hi. Thank you. Thanks for taking my questions. Two from me. You touched on ARR exiting the year. How do you think about midterm sustainable revenue growth rates? Do you think that the previous pre-pandemic rates of sort of 7%-8% growth are realistic as we think to the midterm? Secondly, how have you kind of measured or seen the success of your additional spend? You've obviously been accelerating the business throughout this year. You're continuing to make the investments that you wanted for this year because of that success. Do you think you're now at the right level of investment base, meaning that kind of further top-line acceleration would actually drop through to margins more aggressively starting from next year? Yeah. I think just in terms of the investment and return on investment, we've had a marked step-up investment over the last 18 months. We've kept you abreast of the significant increases, particularly in product and R&D, which is now at 17% of recurring revenue, and similarly, sales and marketing at 42%. Literally, with a lag of about a quarter or so, we're seeing this uptick in growth rates, particularly in Cloud Native, where we're running at 37% of growth in Cloud Native in Q3, with the fastest parts of the portfolio growth coming from non-Intacct. That is obviously measured against our normal ROI, LTV to CAC, all of it is value generative for the business. We will continue to invest, only if we believe it is value generative and is the right thing to do for the medium term of the business. In terms of trajectory, as we’ve said in the past, we’ve got a nice problem at the moment, is that we’re accelerating investment as growth accelerates. However, as we move forward into FY 2022 and FY 2023, our lead objective is growth in Cloud Native and growth in Sage Business Cloud. Our second objective, but only over time, will be to very gradually improve the margin. It will be growth-led and not margin-led as we come through the next two years or so. In terms of medium-term growth rates, I think if you go back two to three years, when we started this transition, first, second quarter FY 2019, one of the things that we cautioned against was extrapolating too much into immediate short-term growth rates. The reason for that was that we have a portfolio in small and medium segments across a good number of territories with very different customer and cloud characteristics. Therefore, we knew that some periods of transition of the portfolio would be very rapid and would give an over-performance in growth rates, and other periods would appear to be giving an under-performance either side of a medium-term trend. We saw exactly that in FY 2019 and the first half of FY 2020, when we migrated substantially all of the Sage 50 base and all of the Sage 200 base very rapidly in North America and Northern Europe, which was also assisted by Making Tax Digital. We exited FY 2020 with an ARR growth rate of about 13%, and I think the U.K. recurring revenue growth rate was about 15% or 16%. That was an out-performance driven by those very rapid migrations. We've now traded through much of the impact of the COVID environment and the business lockdowns that our customers have experienced, and we're heading back to a more normalized growth rate. We don't give medium-term guidance, Stacy, but I think one of the things is, if you look forward at FY 2022 consensus, it's around 7% or 8% recurring revenue growth at this stage. That seems a sensible place to be positioned as we come to the back end of FY 2021 and are just setting our jump-off point for next financial year. When we get to the year end, off the back of that consensus of about 7%-8% recurring revenue growth for FY 2022, we'll be able to give you some slightly more precise guidance. That's helpful. Thank you. The next question is from Mr. James Goodman from Barclays. Morning. Thanks very much. Firstly, just on the non-recurring business, I appreciate the very deliberate strategy there to decrease that line over time. If I look at the comp, minus 35% last year, I had thought it might just bounce a little bit as some of your services come back. Just wondering if you might still expect that, and maybe if you could just comment on the extent to which there is still any real substitution still coming out of that line into the recurring line, albeit appreciate that that's now quite small. Any commentary around the anticipated development of that. Secondly, just on Sage Accounting specifically, I know we've discussed in the past metrics around this business, and you don't want to give precise subscriber numbers. I happen to notice on your website that you're calling out one million business owners on Sage Accounting. Wondered if you could comment on that, whether that's users or you've accelerated to that level of subscribers. Anything on the ARPU that we can discern from that, just the progression of that product. You also mentioned, I think just now, some migration, a small amount from Sage 50, to Intacct. I suspected you might see a little bit more the other way from Sage 50c to Sage Accounting. Anything on that would be helpful. Thank you. James, thanks very much. In terms of the other revenue line, I think in your question you are absolutely spot on. We're now very much in an environment where the priorities of the business in small and medium segment is to build ARR through the cloud-native product offerings that we've got. That is one of our most critical and primary objectives that we're delivering on. That is where investment and focus is being placed. Secondly, is still to move our remaining customer base into the Sage Business Cloud, and that is still growing well in terms of Cloud Connected. We're still seeing good growth in Cloud Connected revenues through very good upsell and cross-sell off the Sage 50 base, particularly in the U.K. and North America, but also ongoing migrations of Sage 50 payroll in the U.K., has given us momentum this year into Cloud Connected. Across continental Europe, France and Spain in particular, the migrations are continuing into Cloud Connected Sage 50, Sage 200. We're about 60% of the way through that transition. That is the priority of the business. Absolutely, as you say, the other revenue line that is about 1/3 licenses and 2/3 professional services, those are not the focus of this business anymore, and as we've seen over the last three years, that revenue line will continue to decline. The rate of decline will vary from quarter to quarter, but will be ongoing and continuing. The rate of decline was a little bit lower than what we've seen over the last two years in Q3, and that was up against the Q3 comparators and the NCA discussion that I just had earlier in the call. Don't read too much into Q3. That revenue line will continue to decline. It is now, I think, if you look at the Q3 numbers, 7% or just below 7% of total revenue, is really not a material driver of our results or our growth rate. In terms of Sage Accounting, yes, as you said, we are focusing on a sustainable, balanced ARR growth of Sage Accounting across the territories where it is offered to our customer base. That is picking up that growth rate. As you know, we are not focused absolutely on sub count, customer count. We're very much more focused on the professional user with a higher ACV and lower churn rates, and that is driving our strategy and go to market and also product upgrades. It's made a good start. The only guidance that I can give you is that it is growing faster than Intacct. That portfolio outside of Intacct is growing significantly faster, and we're very pleased with the progress to date. As you say, given the number of products and territories that we operate in, we're not breaking it down into individual sub count or ACV by product, by territory. We'll have a very big spreadsheet if I did that. No, that's helpful. Thank you. Did you say the 1 million number, though, is users? Did you say that, or just to be clear? Yes. Across the whole portfolio worldwide, that is a number that resonates in terms of our small segment. Okay. Thank you. Excellent. Next question is from the line of Paul Kratz from Jefferies. I think first and foremost, is there any comment you can make around the upsell and cross-sell component of ARR? Has that started to recover, and I guess any color on renewal rates? The other question I also had as well is, when you look at the R&D and S&M, that's ticked up pretty meaningfully. Have you also seen an improvement, I guess, in your customer acquisition economics? This is basically just more efficient spend driving, maybe more efficient growth than you had historically. Maybe just two final questions on Sage. The valuation of things that came out, I'm trying to remember which private equity firm, looked pretty punchy. Does that maybe change your thoughts on your French business? Finally on NCA in the quarter, it looks like the number is almost as large as what you did in the second half of last year. Is that math correct? Any qualifications, I guess, on the size of NCA in the quarter or any comparison versus prior quarters would be helpful. Thanks. Yeah. Thanks very much for the questions. There were five there, I think, or six, which is probably not fair on your colleagues in the analyst community. If you don't mind, we'll take some of them, and the rest we'll take offline, if you don't mind. I think in terms of, you were talking about renewal rates that we've seen across the portfolio and also cross-sell and upsell. Renewal rates, if you recall, in the last year, the first half, we literally, we're running as per normal at about 101% renewal rate by value across the whole portfolio. The second half will obviously be impact of COVID. We were running at about 97% renewal rate by value, but that was consistent and flat during the second half. It wasn't deteriorating at all. Therefore, we averaged out over the full 12 months to about 99% overall for the full year. At the first half, again, we reported 97%, so very much in line. What I can tell you now is in Q3, year to date, we've seen a slight improvement in that. We believe that that is now beginning to head in the right direction. Really good question around sort of cross-sell, up-sell. That is making a difference, particularly in small segments, particularly in the U.K. and also in North America. Customers who are taking the Sage Accounting are very rapidly moving to taking on Sage HR, which is the cloud-native, formerly CakeHR, cloud-native HR solution. They're also taking Sage Payroll in the cloud, AutoEntry, the automated accounting service, Making Tax Digital and submitting your tax returns digitally, and also bank payments and bank feeds. All of those are cloud-native products with a very high attach rate coming off Sage Accounting. That's a very important offering in the Sage Accounting space. Sorry, just remind me of one more. What was your next question? Beg your pardon. Yeah. I think the most important question, I think on my end is, you've increased your investment in R&D, in sales and marketing, and I guess any commentary on- Yes The efficiency of growth or LTV to CAC, I guess, or the unit economics of the business. Has that improved? Yes. Where we are really ramping up new customer acquisition and ramping up investment, we've seen a flattening or a slight reduction in some of the unit economics as we sort of gain territory and get a beachhead into particular customer segments. However, once that becomes a more established trend, and the go-to-market is aligned exactly where we need to, and we're getting benefit from the marketing campaigns that are now becoming much longer established, then we're seeing those unit economics improve. The one thing, and it was one of the earlier questions, I think from Stacy, is that the one thing that we will not do is invest more money or invest any money where we do not see good unit economics on a SaaS basis. It's the classic LTV and LTV to CAC metrics. We will not do that for the sake of gaining new territory or gaining new customer bases. We will always do it on an economic basis. Perfect. That's very clear. Thank you. Thank you. That's all the time we have for question. I will now hand the call over to Mr. Howell for closing remarks. Yes. Thank you very much indeed for attending today. Thank you for your good questions as ever. Absolutely, the right questions off the back of the announcement. James Sherwin-Smith and the IR team, I will be fully available today for any further questions that you'd like to do. Thank you. Thank you. That concludes our conference for today. You may all disconnect. Thank you all for participating.