[Draft]
The Sage Group plc
Acquisition of Intacct Corporation
Stephen Kelly, CEO
Steve Hare, CFO
[x] July 2017
The Sage Group Plc
Acquisition of Intacct CorporationStephen Kelly, CEO
Steve Hare, CFO
25th July 2017
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Disclaimer
This document has been prepared by The Sage Group plc (Sage). It is a presentation of general background information about Sage’s activities
current at the date of the presentation. It is information in a summary form and does not purport to be complete. It is to be read in conjunction with
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Context of the Acquisition
Strategic acquisition of Intacct positions Sage for accelerated cloud momentum
• Significant progress made in reducing overhead cost and reinvesting to
drive increased quality of revenue, whilst maintaining growth of 6% and
margins of 27%
• No M&A in early transformation (FY15 & FY16) whilst the business
realigned as a leaner, more global organisation
• Sage has conducted bolt-on M&A throughout FY17 (Fairsail, Compass,
North American Payments disposal), strengthening the golden triangle and
optimising the organisation for accelerating momentum
Sources of growth
• We now have the leadership, organisational alignment, brand and ability to
innovate in place to target more ambitious growth
• We are targeting new customer acquisition through cloud-first solutions
particularly in North America
• Supporting organic growth with selective bolt-on acquisitions of leading
technology solutions gives more choice to customers
• Intacct significantly enhances the Sage Business Cloud, providing the first and
last cloud Financial Management Solution a customer will ever need
• This strategy further strengthens our investment case of:
o High quality recurring revenue
o Superior operating margins
690K 1,240k
FY15 H1 17
Software subscriptions
84% 86%
FY 15 H1 17
Contract Renewal Rates
FY 15 H1 17
G&A ratio
19% 15%
Further AccelerationTransformation
M&A
C4L C4L
NCA
o Strong free cash flow
o Progressive dividendProgress of transformation
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NCA
M&A
Transformation Why the acquisition of Intacct makes sense now
Net $
Renewal(4)
>107%
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Intacct Highlights
• Founded in 1999 and headquartered in San Jose, California
• Largest independent cloud Financial Management Solutions
provider worldwide, with demonstrated track record of strong
growth
• ‘Born in the cloud’ product and culture – a Gartner Visionary for
Core Cloud Financial Management Suites(1)
• Sophisticated and powerful cloud Financial Management Solution
targeted at growing businesses looking for process automation,
rich financial and operational insight, seamless integration with
their existing application ecosystem, cutting-edge features and user
experience
• Thousands of customers from scale-up to enterprise(5), award-
winning customer satisfaction
• Multi-channel go-to-market – direct, resellers, ISVs (independent
software vendors) and accountants
• Experienced senior management team to continue in roles
• The AICPA(6) and its subsidiary, CPA.com, named Intacct as a
preferred provider of financial applications
Company Overview Financial Snapshot
Strong Industry Partners & Awards
Key strategic
partners
Award Winning
25 Best Small Biz Apps
Customer Satisfaction
(1) Magic Quadrant for Cloud Core Financial Management Suites for Midsize, Large and Global Enterprises, Gartner 19 June 2017.
(2) Last twelve months (“LTM”) to June 2017, unaudited. See page 6 for detailed definition.
(3) See page 6 for definition.
(4) See page 6 for definition.
(5) Scale-up is defined as businesses of 10-200 employees, enterprise is defined as businesses of 200-2,000+ employees.
(6) American Institute of Certified Public Accountants.
Revenue(2)
$88mSubscription
>90%
3-Year
Revenue
CAGR(2)
33%+
ARR(3)
$96m
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Transaction Summary
• Consideration to be funded from cash on hand, existing revolving credit facility and a new $390m term loan
• Pro forma Net Debt / EBITDA will remain within the 1 – 2x corridor
• Expected to close within weeks - HSR approval obtained on 17 July 2017
• Acquisition of Intacct Corporation, largest independent cloud Financial Management Solutions provider, with
demonstrated track record of strong growth
• Transaction value of $850m (£654m(1)), to be paid in cash and rolled-over Sage options(2)
• Integration focused on maintaining and accelerating growth momentum, minimising go-to-market disruption
and bringing Intacct within the Sage Business Cloud
• Existing management team will run Intacct, ensuring continuity to customers, partners and employees
Transaction Outline
Financing & Timing
Seamless
Integration
(1) Exchange rate of £1.00 / $1.30.
(2) Approximately $43m of the transaction value (this being a fixed amount based on the difference between value per underlying share of Intacct common stock, the number of unvested options and the aggregate exercise prices of the rolled-
over options) due to unvested options to purchase shares of Intacct common stock held by management and employees, will be rolled over into options to purchase Sage shares at a fixed exchange ratio based on Sage’s share price in the
period prior to completion. Vesting will be conditioned on continued employment. Key members of the Intacct executive management are rolling a minimum of 25% of their proceeds into new Sage options, vesting in 12 months assuming
continued employment - in addition to other retention incentives being provided.
(3) Excluding any purchase price accounting adjustments, in particular fair value adjustments to deferred revenue upon acquisition.
• Management reconfirms current guidance of at least 6% organic revenue growth including contribution from
North American payments through to completion of disposal and underlying operating margin of at least 27%
• We expect Sage People (Fairsail), Intacct (to be known as Sage Intacct after completion) and Compass to
add approximately £20m of revenue in this financial year (3)
Guidance
• Demonstrates Sage’s commitment to accelerating its cloud-first strategy and winning in the US
• Strengthens Sage’s position as a leading cloud provider from start-up to global enterprise
• Intacct will be a platform for growth, funded from Sage’s ongoing cost saving initiatives
Compelling
Strategic Rationale
Strong Growth Profile
$39
$96
Jun-14 Jun-17
$37
$88
LTM June 2014 LTM June 2017
ARR ($m)(3) Revenue ($m)(1)
Highlights
• With revenues of $88m(1), Intacct has been consistently delivering revenue growth in excess of 30%
• Intacct’s solutions are only sold on subscription, with over 90% of revenues subscription-based
• Intacct sells through both direct & reseller channels as well as through accountants (as part of its AICPA partnership) and
ISVs integrating Intacct’s solution into their business management solution
• Attractive unit economics, over 107% dollar net renewal rate(2) driven by strong customer focus and product innovation
Revenue Split(1)
SSRS8%
Indirect33%
Direct59%
Recurring92%
(1) Unaudited, last twelve months to June 2017. Normalised for impact of one-off deferred revenue release resulting from renewal of a significant ISV relationship. Including this deferred revenue release revenues for LTM June 2017 are
$93m. LTM June 2014 revenues were similarly normalised upwards by $1.2m. Excluding these normalisations, 3-year revenue CAGR would be 37%.
(2) % of contracted monthly subscription revenue renewed at the renewal date plus the monthly subscription revenue added in that period from add-ons by existing customers. Average quarterly rate for FY16 and YTD FY17.
(3) Annualised recurring revenues, the total recurring revenue under contract from all current customers and ISVs over a one year period.6
Compelling Strategic Rationale
• Strengthens Sage’s positioning as the first and last cloud Financial Management Solution a customer
will ever need - from start-up to global enterprise
• Ensures Sage’s business partners and value added resellers can capture the cloud growth
opportunity with Sage
• Enhances Sage’s ability to benefit from the accelerating move to the cloud within the growing $9bn
North American market segment, where over half of our total addressable market is located, for
Financial Management Solutions used by scale-up and enterprise businesses(1)
• Shifting demand towards best of breed solutions with strong integration capabilities and away from
traditional monolithic ERP suites benefits Intacct as well as other Sage solutions like Sage Live
• Market remains very fragmented with a high number of ‘legacy’ on premise vendors
Favourable Market
Dynamics
Enhances the Sage
Business Cloud
Simple and powerful
accounting and
invoicing for start-ups,
small businesses, and
sole traders
Flexible and scalable
financial management
for growing businesses
Comprehensive and
highly configurable
financial management
for finance
professionals
Adaptable and
integrated business
management solution
for larger enterprises
$150-300
Typical ACV(2)
$3-7k
Typical ACV(2)
$20-30k
Typical ACV(2)
$50k+
Typical ACV(2)
(1) Source: Sage IDC model, market for accounting and business management solutions for businesses with 10-2000 FTE as of 2017.
(2) Typical annualised value of subscription for a direct customer – actual ACV will range depending on user numbers, modules adopted, etc. 7
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Compelling Strategic Rationale (Cont’d)
• Intacct is primarily sold in North America, and deployed across many international subsidiaries
• Sage has extensive expertise in localising products and the commercial capability to bring those
products to market, both directly and through its partner network
• Intention to launch Intacct into Sage’s other markets in the medium term, starting with English-
speaking geographies
• Potential cross-sell opportunities with Sage People given overlap in target customer size, geography,
verticals and cloud readiness; strengthening our commitment to the golden triangle
• Enhancing our Customer For Life strategy by providing our existing customers who are looking to migrate
to the cloud a comprehensive migration path within Sage.
• Fastest growing independent cloud Financial Management Solution in North America
• Intacct team brings significant expertise in building and scaling a cloud business
• Opportunity for Sage in North America as a leading provider of cloud Financial Management
Solutions from start-up to global enterprise
Platform for Market
Leadership
Potential for Global
Expansion
Cross-sell & Other
Considerations
Delivering Results for Customers
“Intacct has supported us as
we’ve expanded to over 20
countries internationally, and
worked seamlessly with all our
world-class cloud-based
applications. As a result, we can
focus on being true strategic
partners to our global product
leaders”
Customer A CFO
“Intacct is the perfect partner to
scale with us along the way. The
software delivers major productivity
improvements for our team, but
more importantly, it gives us access
to trusted financial data on a real-
time basis, which is a major benefit
across our organization”
“Because of the efficiency and visibility I
have in Intacct, I’ve been able to provide
more strategic value to the company
vs. spending most of my time on our day-
to-day accounting complexities. Now, I
can focus on business planning with our
CEO and board members, and work
more with our sales team on major deals”
Delivering 250%
ROI &
6 month payback
Empowering the
Finance
Professional
From Scale-up to
Global Enterprise
Note: Customer testimonial comments from Intacct website: https://us.intacct.com/financial-software-customers 9
Customer B CFO Customer C CFO
Intacct Strengthens Sage’s Strategic Pillars
• Demonstrated ability of winning customers at scale in the US
• Strong team with a solid track record of beating the competition who will continue to
lead the business
• Position Sage as a leading provider of cloud Financial Management Solutions from
start-up to global enterprise
• Committed to successful integration into Sage
• Proven value-creating business model, attractive area for re-investment of Sage
cost savings
• Both organisations are dedicated to customer success and innovation
• Enhances Sage’s ability to offer existing customers a path to the cloud
• Enhances the Sage Business Cloud
• Strong technology base and demonstrated innovation track record
Customers
for Life
One Sage
Capacity
for Growth
Winning in
the Market
Revolutionise
Business
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✓
✓
✓
✓
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© 2017 The Sage Group plc or its licensors. Sage, Sage logos, Sage product and service names mentioned herein are the trademarks of The Sage Group plc or its
licensors. All other trademarks are the property of their respective owners.
Q&A
© 2017 The Sage Group plc or its licensors. Sage, Sage logos, Sage product and service names mentioned herein are the trademarks of The Sage Group plc or its
licensors. All other trademarks are the property of their respective owners.
Appendix
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Powerful Cloud Financial Management Solution
• ‘Born in the cloud’ Financial
Management Solution targeted
at CFOs and financial
professionals looking for a
sophisticated and powerful
solution
• Best-of-breed cloud Financial
Management Solution:
o Automation for efficient
financial operations
o Easy integration to other
solutions
o Visibility for real-time
decision making
• Fresh & modern ‘Action’ user
interface, multi-dimensional
accounting, mobile and natively
social
All-In-One
cloud Financial
Management
Solution
Accounting
Franchise
Financial
Services
Healthcare
Hospitality
Nonprofit
Services
Software & SaaS
Wholesale
Contract Subscription
Billing
Contract Revenue
Management
Fixed Assets
Inventory
Management
Multi-Entity and Global
Consolidations
Project
Accounting
Sales and
Use Tax
Time and Expense
Management
Vendor Payment
Services
General
Ledger
Accounts
Payable
Accounts
Receivable
Cash
Management
Collaborate
Order
Management
Purchasing
Reports and
Dashboard
Core FinancialsAdditional Modules
Industry Specific Solutions
Partnering for Success
• Over 200 marketplace partners
whose solutions integrate
seamlessly with Intacct’s cloud
Financial Management Solution
• 75% of customers integrate with
2+ partners
• API-first(1) strategy, focused on
enabling seamless integration
• Over 50% of transactions are
posted through integrations with
third party solutions
(1) API = application programming interface, a set of clearly defined methods of communication between software components or solutions. 14
Strong Track Record of Innovation
• Pure cloud, multi-tenant solution
• Configuration only – no customisation,
single code base
• Support for major browsers, operating
systems and any device
• Flexible API architecture with 12 years
backward compatibility
• Highly scalable, able to serve large
Enterprise customers
• Continuous feature releases
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