Business Cloud growth drives Sage recurring revenues

Sage is continuing its drive towards becoming a software-as-a-service (SaaS) player, with its latest financial update indicating that it is making progress with that ambition.

The firm has shared an update covering the first nine months of trading, up to the 30 June, with the main highlight being the increase in recurring revenue growth.

The firm saw an increase of 9% in recurring revenue, with software subscriptions climbing by 22.6% to come in at £885m, as it kept the momentum going around its Business Cloud proposition.

The UK and Ireland, and Northern Europe region overall, saw recurring revenues climb by 10.6% year on year (YoY) to £281m, and the US business was also up by 11.4%, hitting £474m. As expected given the shift to cloud, the SQL server reporting services (SSRS) and processing revenue fell by 24.2% in the first nine months, which was expected but accelerated by the coronavirus pandemic.

Total Group revenue improved YoY by 4.1% to reach £1.395m and 1.1% in the third quarter, coming in at £460m.

“Sage has achieved good results in the first nine months, continuing to deliver against our strategy, in line with our vision to become a great SaaS company. Despite the disruption caused by Covid-19, our colleagues have performed exceptionally, providing strong support both to each other and to our customers,” said Jonathan Howell, chief financial officer at Sage.

With three financial quarters already in the bag, the vendor is forecasting that it is expecting recurring revenue growth for the full year to come in at around 7 to 8%. The update also indicated that there had been ‘lower than expected churn’ in the firm’s small and medium-sized enterprise (SME) customer base during the Covid-19 crisis.

“We are confident that our sustained investment in Sage Business Cloud throughout the economic cycle will form a strong base for the long-term success of Sage,” added Howell.

There was some caution expressed about just how the ending of the furlough scheme and government support might affect the SME customer base, but overall the firm struck a cautiously optimistic note.

The software player has been driving both customers and partners to the Business Cloud, and earlier this year it launched a marketplace to encourage independent software vendors (ISVs) to get their approved apps listed.

For channel partners, the addition of the marketplace was pitched as a way of giving resellers more services to offer SMEs to encourage them to view choosing Sage as a wider option.

“In our survey studies, SMEs consistently cite application selection and integration as their top technology challenges. Most lack the time, expertise and money to solve this problem on their own,” said Laurie McCabe, co-founder at SMB Group, back in February.

“Sage validates and certifies application partner integrations, making it easier and more efficient for their customers to connect multiple solutions to run their business. As a result, the new Sage Marketplace makes it simpler for customers to discover, buy and use the right application.”