The Sage Group plc

Good morning, everyone. Welcome to the Q3 trading update call for the Sage Group. Your speakers today will be Stephen Hare, Chief Executive Officer, and Jacqui Cartin, Chief Financial Officer. After a short presentation, there will be a question and answer session. To ask a question, you will need to press star 1 and 1. I would now like to hand the conference over to Ms. Cartin. Please go ahead.

Good morning, everyone, and thanks for joining us. I'll start by taking you through our performance in the first nine months of the year, and after that, Steve and I will be happy to take your questions. Sage has delivered an excellent performance. Through focused execution, we've achieved broad-based acceleration across our key products and regions. This is underpinned by the investments that we're making in our platform and AI capabilities, which we continue to enhance the value we deliver to our customers. Revenue increased by 11%, 2.1 billion in the first nine months, reflecting strong demand for our solutions from both new and existing customers. This is supported by the expansion of AI-powered features across the portfolio, including growth in Sage co-pilot and agentic capabilities. Today, Sage's AI tools are available to over 600,000 customers. That's up more than 20% since we reported our half-year results in May. and adoption continues to grow as customers increasingly rely on Sage for critical finance, HR and payroll workflows where getting it right is essential. I'm moving to the regional view. In North America, revenue increased by 14% to 932 million with continued momentum in Sage Intact supported by our vertical go-to-market approach. We also saw good growth in Sage 50 as well as in Sage 200 Payroll and HR. In the UKAA, revenue grew by 10% to 602 million. Sage Intact continues to scale rapidly alongside further strong growth in Sage 50. Our cloud-native small business suite including Sage Accounting also performed well when momentum and embedded services continues to build. And in Europe, revenue increased by 7% to 528 million. This reflects strength in Sage X3 and Sage 200, broader portfolio growth and increasing traction in Sage Untact. And underpinning all of this is the expansion of Sage Business Cloud Revenue, which grew at 15% to 1.8 billion, driven by strength across both native and connected. Cloud Native was particularly strong, growing at 25% to 794 million. And moving to recurring revenue, this grew by 11% to 2 billion, reflecting continued momentum in ARR. And subscription revenue increased by 13% to over 1.7 billion, with subscription penetration reaching 84% and continuing to rise. For Q3 on a standalone basis, revenue was almost 700 million, with growth accelerating to 12%. And on an organic basis, revenue for the first nine months was over 2 billion, an increase of 10%. So turning to the outlook. Reflecting our performance in the year to date, we reiterate our full year guidance as set out at the half year. We expect organic revenue growth to be above 9% and operating margins to trend upwards in FY26 and beyond. as we continue to focus on efficiently scaling the grip. So to conclude, Sage has delivered an excellent performance in the first nine months of the year with momentum building across the grip. We're strengthening our products, broadening our ecosystem and deepening the value that we create across our platform. By combining trusted technology, intelligent innovation and human expertise, we're helping customers run their businesses with greater productivity, Insight and Confidence went further strengthening the quality resilience and growth potential of SAGE underpinned by disciplined execution this gives us confidence in our ability to continue delivering sustainable efficient growth over the long term thank you very much and Steve and I would now be delighted to take your questions

As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile a Q&A roster. Our first question comes from the line of George Webb of Morgan Stanley. Please go ahead. Your line is open.