Good morning, everyone. Welcome to the Q3 trading update call for The Sage Group. Your presenter today will be Jonathan Howell, Chief Financial Officer, who is joined by James Sherwood, Head of Investor Relations. After the speaker presentation, there will be a question and answer session. To ask a question, you will need to press star one and one to ask a question. I would now like to hand the conference over to Mr. Howell. Please go ahead. Thank you very much. Good morning, everyone, and welcome to Sage's Q3 trading update. First, I'll run through the key numbers and the performance of the business, and after that, we can open for Q&A. As a reminder, all numbers in the trading statement are on an organic basis. Sage performed strongly in the first 9 months as we continue to deliver against our strategic priorities. Recurring revenue increased by 9% to over GBP 1.3 billion, driven by Sage Business Cloud growth of 20% to GBP 886 million. Software subscription revenue grew by 14% to GBP 1.1 billion. As a result, three-quarters of our total revenue is now on subscription, up from 69% last year. Regionally, North America increased recurring revenue by 13% with accelerating growth in Sage Intacct, together with growth in Cloud Connected. In Northern Europe, recurring revenue grew by 7%. This was driven by continued success in Cloud Native solutions, in particular Sage Accounting, Sage Intacct, and Sage HR, and was supported by good levels of growth in Sage 50 Cloud Connected. In the international region, recurring revenue grew by 5% with growth across the Sage Business Cloud. This was supported by further progress in migrations. Looking at the portfolio view, recurring revenue for the future Sage Business Cloud opportunity increased by 11% to over GBP 1.2 billion. This was underpinned by a strong performance in Cloud Native, where recurring revenue grew by 42% to GBP 297 million. This was driven by good levels of new customer acquisition. Cloud Connected has also continued to grow strongly through both new customer acquisition and further progress in migrations. As a result, Sage Business Cloud penetration has increased to 72%. This is up from 67% last year, with more customers able to connect to Sage's digital network. Finally, in the non-Sage Business Cloud portfolio, recurring revenue was down by 11%, in line with our strategy. Now, moving on to the third quarter. Recurring revenue growth continued to accelerate, increasing by 10% to GBP 464 million, supported by continued investment in sales, marketing, and innovation. Now, turning to other revenue, which decreased by 25% to GBP 82 million, in line with expectations. As a result, total revenue grew by 6% to over GBP 1.4 billion. For Q3, this growth was 7% to GBP 488 million. Finishing on the outlook, we now expect organic recurring revenue growth for FY22 to be towards the top end of our guidance range of 8%-9%. Guidance across other metrics remains unchanged. In summary, Sage has delivered a strong performance in the first nine months, entering the final quarter of the year with good momentum. Thank you, and now let's open for questions. Ladies and gentlemen, we're now beginning the question and answer session. If you wish to ask a question, please press star one and one on your telephone. Please stand by. We are taking our first question. It's on the line of Adam Wood from Morgan Stanley. Please go ahead. Hi. Good morning, Jonathan. Thanks for taking the question. Congratulations on another good quarter. First of all, just on the recurring, that stepped up. Obviously driving that is the ARR. Could you maybe just give us an update on where we are with ARR in the third quarter and how that's been trending through the year? And then I guess on the macro side, you say in the release that you're you're mindful of trends there, but I guess the guidance, the moving to top end of guidance, the fact that you're mindful and no more than that suggests that you're not seeing anything on that. Could you maybe just talk a little bit about, you know, trends in the business around renewals and NCA and so on, just to confirm that? Thank you. Yes. Thank you, Adam, for the question. Yes, as you can see, this has been a strong quarter and a good performance for the first 9 months. If we just look at recurring revenue first, how that's progressed during the year before we move to ARR. At Q1, we reported recurring revenue growth of just below 8%. At the first half stage, we reported recurring revenue slightly above 8%. Now, as you can see for Q3 year to date, we've reported recurring revenue growth of approaching 9%. Q3 standalone was 10% growth for recurring revenue. You know, by definition, as you know, that means that we are seeing good progressive growth in ARR. If you just, you know, if I give you a snapshot of where we are, Q3 sequential growth in ARR was 3%, Q2 was 3%, and Q1 sequential growth was 2%. That gives you the progression. As you know, we only report ARR at the half year and the full year stage. Clearly when we report full year numbers at the year-end, we'll give you an update then. In terms of macro, it's very much, you know, as we've said in the release, that performance that we have seen gives us confidence to raise guidance towards the top end of the range of 8%-9%. Just to confirm that at this stage we have not seen any impact from the macroeconomic environment on our business. In terms of, you know, upsell and cross-sell, NCA, and migrations, those are continuing at the same type of trend and same type of performance that we've seen for much of the year. We are mindful of the outlook. We've given very clear guidance for the full year, and clearly as we move through Q4 and into Q1, we'll continue to monitor the performance of the business and update you at the year-end. Okay. That's very helpful. Thank you. Thank you for your question. We are now taking our next question, so please stand by. The next question from Varun Agarwal from JP Morgan. Hi. Morning. Thanks for letting me on. I just have one question on your cost base. Can you comment on the progression of your strategic investments, be it in go-to-market, developing new products, et cetera, into the second half? With the macro deteriorating, how would you think about striking a balance between investments and protecting your margin as we look into next year? Thank you. Yes, in terms of the investment program, as you know, we reallocated considerable spend to product R&D and also marketing. That has continued. That is, I think, you know, being demonstrated by the strong growth that we're seeing in Cloud Native in particular, where for the nine months to date we've seen a 42% growth in recurring revenue, and Cloud Connected, which is also growing at 12%. Those are our core product sets, and the growth that you're seeing is being driven by the additional investment. I think just on that, we've, you know, got a very good product set now across North America and UKI, but we're now rolling out Cloud Native products across the international region. If you just look back over the last 9-12 months or so, France, we've got Sage Intacct Manufacturing, you know, one of our premier Cloud Native products released. Spain, Sage Accounting, Germany, Sage HR, you know, which has been very successful in Northern Europe and North America. France, we've just launched Sage Active. That investment is continuing at pace. In terms of sort of margin, you know, as you know, we entered this financial year, reporting a margin of 19.3% for FY21. Our guidance was that, during the course of FY22 and beyond, we would see that margin trend upwards. We've repeated that guidance at Q1, the first half stage and now at Q3, and we feel confident that we will achieve that margin guidance for FY22. I note the analyst consensus is around 20%, and we feel comfortable with that. Looking further ahead to FY23, our target is to continue to increase the margin. We will monitor that carefully, and all things being equal, that's very much our target, but we will have to continue to monitor the performance of the business. Thanks for the call. Thank you for your question. We are going now to take our next question. It's from James Goodman from Barclays. Please go ahead. Morning. Thank you very much. Yeah, encouraging developments on the recurring, on the ARR side. Just to look quickly at the other revenue, which has become very small now clearly in the mix, but still declining very quickly. Just wondered, are we close to stabilization there now? Is it just the license that's still coming out of that line? And then secondly, just on Xero, we've seen a freemium product from Xero, perhaps around Making Tax Digital. Just wondered, is that something that you would consider at the Sage Accounting product side? Thank you. Yes, James. Thank you very much for the questions. You're absolutely right, you know, in your question that the other revenue line is now becoming a you know, a significantly much smaller part of our total revenue. It's about 5 or 6%. You know, as you know. For the last four years or so, that's been a key part of our strategy to migrate away from on-premise licenses and professional services. That you know has provided us the opportunity and the investment to move the business towards subscription. What we've seen in this first nine months of the year is a decline of 25%. That's pretty consistent with what we saw last year. That is also consistent with what we anticipate for Q4, and we do anticipate those, you know, a continued decline in that other revenue line. That, in part, will depend upon, you know, the strategic investments that we make across the rest of the business. We'll keep you updated. The other part of your question, sorry, that was in relation to? Just in relation to Xero releasing a freemium version of their product and whether you would- Yes consider that for Sage Accounting or see that as relevant. Yes as we move toward the next phase of Making Tax Digital. Yes. Thank you. Thank you, James. First of all, if you recall back in, you know, sort of FY19 and, you know, Making Tax Digital, the first phase of it in the UK was a very significant driver of our business. And that because that hit the Sage 50 Cloud Connected base, which is where we are very, very strong in the UK. What we are seeing with this second phase of Making Tax Digital is a move to smaller businesses and over an extended period of time, right the way through to FY24. It's in smaller businesses, and over a much more extended period of time to the deadline. Therefore, by definition, it will not have such a material impact on our business. Therefore, I don't think this is an environment where we will be competing overtly on price. You know, that's not our strategy. I think the other thing that's just worth, you know, pointing out is that we will continue to offer a full range of services for you know, for our small businesses. One of those will be that we see, you know, increasing around the world is the digitization of government and tax related returns. While I wouldn't necessarily focus on this one event in the U.K., it is a strong and growing secular trend around the world, which is going to be a driver of our business over a number of years into the future. I hope that helps, James. Thank you. Yeah, it does. Thank you. Thank you for your question. We're now taking our next question. The next question from Will Singlehurst from Numis. Morning, thanks for taking the question. I wanted to ask about the growth of your Cloud Native business and to what extent are you seeing any acceleration in the amount of migrations impacting on that? Within that, could you also talk about how Sage Partner Cloud is going? Yes. The growth that we're seeing in Cloud Native is driven by, you know, the three key products that we've highlighted. These are established trends with established go-to-market in our core territories of North America and Northern Europe, which are showing a consistency and developing growth, which is exactly what you would hope from a SaaS business. Therefore, Sage Intacct, you know, still, you know, at the half year stage when we last reported Sage Intacct numbers growing at over 30% in North America, growing at considerably faster rates in the rest of the English-speaking territories that we cover. Sage Accounting, which again, you know, in our core territories, is growing faster than that Sage Intacct number of 30%. And then Sage People. All of those are continuing to drive growth. We importantly are seeing less of that growth now, quarter by quarter, is coming from migrations. I think if you go back a couple of quarters or so, we'd probably say about a third of that growth is coming from migrations. It's now less than a quarter. If you go, you know, if you go back probably two years or so ago, you'd find at least two-thirds of that was coming from migration. We've gone from two thirds to about a third, you know, a couple of quarters or so ago, down to less than a quarter now. These are new customers coming through the door and buying our products and then importantly giving us that opportunity to cross-sell and upsell. I think that's all very good. Sage Partner Cloud is a very, very small component of that. It's not a key driver, but nonetheless in some of our territories is a product that some of our customers want. Thank you, Will. I hope that helps. Yep. Great. Thanks. Thank you for your question. We're now taking our next question. From the line of Charles Brennan from Jefferies. Good morning. Good morning, Jonathan. Thanks for taking my question. Two from me actually. Just firstly, can I ask you to be a little bit more explicit on your margin comments? Normally for software companies, if we see them delivering incrementally better news on revenues, that normally drops through to incrementally better margins. Should we assume that's the case here, or are you using this opportunity to continue to double down on your R&D and sales investments that will limit the scope for margin upside? Secondly, on an unrelated topic, can you just give some context to some of the recent press stories that you've been forcing some of the recent Sage 50 perpetual license customers onto perpetual deals? Thank you. Yes. Thank you, Charlie. Two good questions. Look, on margins, our guidance is very clear and very consistent. The guidance that we've got now, we first set at the FY20 results. At the FY20 results, we said there will be a further step down in margin in FY21, if you recall, but thereafter, FY22 and beyond, we will be in an environment where we will see the margin trend upwards. That's been a very consistent form of our guidance now for 18 months, and that's exactly what you saw at the first half, and that's exactly what we're guiding to in the future. To your point, you're absolutely spot on. We will continue to target aggressive investment, particularly in product and R&D and marketing, where we can. We would dynamically increase that investment if we've got the capacity to do so. We will also dynamically reallocate during the course of any period. Underlying and fundamental is we are targeting an environment where the rate of revenue growth exceeds the rate of cost growth, and therefore margin will expand. And that is very much part of the model that, you know, of how we want to drive the business going forward. And as we build out that sort of cloud-native and cloud-connected base of fewer products in fewer larger, you know, sectors and territories we would generate the efficiencies to help drive exactly what you just described in the question. On the Sage 50 question, yes, in some of our territories now, we have a very small number of Sage 50 on-premise users. This is a migration strategy which you know has been running since the beginning of FY19, so you know, approaching 4 years. We do get to a stage in some of our territories where we think it's best and safest for the customer to move to our Cloud Connected or Cloud Native products. That drives the uptake for them of the best and most up-to-date and safest products and most compliant products. It also drives you know, the efficiencies that we need in our business to address the margin point that you've just asked. I would add though, you know, we take a very careful and long-term view about looking after our customers during this migration process, and that's no different for this very small subset of Sage 50 on-premise license holders. I hope that helps. I was going to say, are you able to articulate how much of the Sage 50 base is still on-premises? Well, if we look at our core territories, regions of North America and Northern Europe, substantially over 90% of those Sage 50 customers are in the Cloud Connected environment, and more and more are relying on all of those Cloud Native modules and services that we provide. Sage HR, automated payments, automated digital tax returns, AutoEntry. All of those Cloud Native modules are actually driving that Sage 50 base as we move forward. Perfect. Thank you. Thank you for your question. We're taking now the next question. Please stand by. The question from the line of Ben Callow from Exane BNP Paribas. Please go ahead. Hi, good morning. Thanks for taking my question. Two, if I may. I'm just curious on the effectiveness, I suppose, of each pound of marketing spend that you're allocating. You obviously had a big lift off with the Boss It campaign. I'm just curious as to what are those returns on each pound of marketing spend today versus, you know, a year or two ago. Are these things finding that normalizing or are those returns still being maintained? Second question would be on NCA. Could you just comment on the activity here? Are you seeing any sign of sort of pipelines being delayed or maybe a slight change in the rate of upsell that you're able to lock in? Just curious in the context of other software peers commenting on this. Thanks. Yes. Good question, Ben. Thank you. You know, part of the move to being a SaaS business has been the real investment in data and financial reporting of the type of metrics that you would expect for a SaaS business. There are a whole suite of metrics that we look at and needless to say, you know, if you want a sort of in a snapshot, in a summary, it's LTV to CAC. We monitor that by geography, by segment, and by individual product. So we can absolutely see the trends developing. I can tell you that the LTV to CAC for all of our products around the world in Cloud Connected and Cloud Native are showing good and positive returns. In Northern Europe, when we started that heavy investment, you could see the LTV to CAC dip slightly. It is still positive and that is now beginning to pick up. If you look at medium segment, particularly Sage Intacct, in our core territories, that just builds from a high base and is continuing to build and increase. We are very comfortable around our ability and the direction of travel of those key SaaS metrics that model the, you know, that model and measure the efficiency of investment. In terms of NCA, I mean, very good question. In short, we have not seen any change. As we sit here today, we have not seen any change in the sales life cycle, in the propensity for cross-sell and up-sell. Those are the things that we need to monitor. You know, in past you know typical macroeconomic times, we have seen you know a slight delay in CFOs in making that decision to invest in a new product or to you know invest in further products. We have not seen that yet. I think the underlying and critical message is, we are being driven by a secular trend at the moment where businesses, small businesses are seeking digitization, and software to drive deep and meaningful efficiencies in their businesses, and particularly in their back offices. That is a very strong force, which clearly at the moment is counteracting you know any negative impact from you know the wider macroeconomic environment. That's where we sit now. Clearly, you know, we'll monitor it over the next quarter, and when we report back in November, we can give you an update then. I hope that helps, Ben. Thank you. Thank you for your question. We are taking our next question. The next question from Michael Briest from UBS. Please go ahead. Yeah. Morning, Jonathan. A couple from me as well. Just in terms of the guidance on margins, I mean, it's very specific in your outlook statement from the interims that it's an organic operating margin and the consensus on the website also shows organic. With the Brightpearl acquisition, would you expect margins to be closer to flat, given that was a loss-making business? That was one question. I think, did you say you had two? Yes, sure. I'll give you the other one. Yeah. Just in terms of ARR, I mean, exiting 2020, you did 5%. Well, you exited with 5% growth and you guided 3%-5% for recurring and did 5%. Yes. You exited 8% last year and you're guiding 8%-9%, closer to 9%. Yes. If you carry on, you're going to be, I say 11, you know, to push maybe 12% ARR growth exiting this year. You know, should we be thinking about this sort of pattern where the subsequent year's recurring revenue growth is pretty closely aligned? Yeah. Okay. On the margin, very good question. You know, we do report, as you say, on an adjusted basis. Brightpearl, you know, that acquisition is dilutive to our margin. But if you recall at the first half stage, Steve and I were very clear on the call that any margin dilution from acquisitions would be absorbed within our existing cost base. It's a very good question that you raise, and therefore is not going to impact our guidance on margin for this year and beyond. That, you know, we're very clear on that. Secondly, in terms of ARR, you know, nailed it in terms of, you know, the ARR build, which then leads to recurring revenue performance. We've got, you know, very clear visibility and confidence to be able to raise guidance, as you said, you know, for the full year. Looking further out into FY23, as you'd expect, we'll provide guidance at this year-end results for FY23. There's a good trend there that you can see during the course of the last 12 months. Can I just ask a follow-up on pricing? Could you say how much of the ARR progression this year has come from pricing and maybe how much more is likely to come? Yes, in terms of pricing, look, first of all, as we said again at the half years, this is no different. Nothing's really changed. We always, you know, will target price increases judiciously and carefully across our customer and product base where we see a fair value exchange. In Q3, that approach has not changed since the first half at all. As we sit here now, you know, the pricing that we have put through is running at about 3% for a full year on an annualized basis, and we don't anticipate that will change materially during the course of this year. We will drive good value for our customers and good shareholder returns by building the NCA capability that we've got in Cloud Native and has been subject of, you know, a number of questions earlier on the call. All right. I hope that helps. Thank you very much. Yeah. Thank you. That's all the time we have for questions. I will now hand the call over to Mr. Howell for closing remarks. Thank you very much, everybody for those questions. We clearly, James and myself, will be available for, you know, any further questions or discussions that you'd like to have over the next few days. Thank you very much indeed for your time. It's appreciated. That concludes the conference for today. Thank you for participating. You may all disconnect.