I would now like to turn the conference over to Mr. Howell. Please go ahead.
Thank you very much, and good morning, everyone, and welcome to Sage's Q1 trading update. I'll briefly run through the key numbers and the performance of the business, and after that, we can open for Q&A. Sage has made a strong start to the year, delivering revenue growth in line with our expectations. Total revenue for the group increased by 10% to GBP 612 million, driven by broad-based growth across all regions. In North America, revenue grew by 11% to GBP 279 million, with a good performance in Sage Intacct, together with continuing growth in Sage 200 and Sage 50. In the UKIA region, revenue grew by 9% to GBP 176 million. This was driven by strong progress in Sage Intacct, together with further success in Sage Accounting, Sage Payroll, and Sage 50.
In Europe, revenue increased by 8% to GBP 157 million, with a strong performance across our Accounting, HR, and Payroll solutions. Turning now to the main performance drivers, Sage's platform revenue grew by 13% to just over GBP 500 million, reflecting good strategic progress as we further expand our global cloud solutions. Within this, cloud-native revenue grew by 22% to GBP 208 million. Importantly, growth remained well-balanced between new and existing customers. Recurring revenue increased by 10% to GBP 595 million, driven by continued momentum in ARR. This includes subscription revenue growth of 12%, resulting in subscription penetration of 83%. On an organic basis, total revenue increased by 9% to GBP 611 million. Finishing on the outlook, with first-quarter growth in line with our plan, we reiterate our guidance for the full year.
Organic total revenue growth is expected to be 9% or above, and we expect operating margins to trend upwards in FY 2025 and beyond. And so, in summary, Sage has made a strong start to the year as we continue to execute on our strategy and focus on delivering sustainable, efficient growth. Thank you, and now let's open for questions.
Thank you, sir. As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. We are now going to proceed with our first question, and the questions come from the line of Adam Wood from Morgan Stanley. Please ask your question. Your line is open.
Hi, good morning. Thanks for taking the question. I wonder if you could just give us a little update on the key growth drivers that you're seeing by region, maybe especially what you're seeing on changes on the macro side versus what you're seeing, on benefits from product growth as the products that you've launched across the various regions start to ramp up, and gain more traction. Thank you.
Good morning. Thank you. Look, first of all, as you can see from the announcements, this has been a strong quarter for Sage. We've delivered underlying revenue growth of 10%. That's up against full-year FY 2024 of 9%, and it's very much in line with our full plan for the year. We've seen good growth in North America. Total revenue is up by 11%. That's just slightly down on the 12% that we saw in full-year FY 2024, but it was a good performance from Sage Intacct off an increasingly larger base and also good continued growth across the portfolio in Sage 200 and Sage 50. North America, don't forget, is our largest region. It remains robust, and it's our fastest-growing business. UKIA, that was a very strong performance as well. That's up by 9% in Q1 against 8% in FY 2024. Particularly strong growth in Sage Intacct.
What we saw in the second half of last year has continued into Q1, particularly through NCA. And we've also had good success in our cloud solutions for the small business portfolio, supported also by Sage 200 and Sage 50. And in Europe, revenue is up by 8% compared to 6% for the full year in FY 2024. And that comes from a strong performance across our full portfolio of products, Accounting, HR, and Payroll solutions. So all in all, it's a good start to the year. It gives us good momentum, as we, you know, as we enter Q2, and it supports our guidance for the full year. And then I think, secondly, in terms of macro, we haven't seen a material change from the second half of last year.
As you know, the SMBs, they continue to navigate this uncertain macroeconomic environment, but conditions are stable, and we haven't seen a deterioration. And, you know, as I, you know, often say on these calls, our solutions save our customers time. The digitization of back offices drives efficiency and enables our business owners to focus on growing their business. And then lastly, in terms of the competitive environment, we've seen no material change there either. Thank you.
Thank you.
Thank you. We are now going to proceed with our next question, and the questions come from the line of Toby Ogg from JP Morgan. Please ask a question.
Yeah. Hi, good morning, and thanks for the question. Perhaps you could just touch on the sequential ARR evolution in Q1. I know you had a strong Q4 sequential rate of growth, so it would be good to hear how the sequentials have evolved in Q1. Then just anything you could call out as well in terms of seasonality-wise to consider here going forward. Thank you.
Yes, thank you. Thank you very much indeed, Toby. First of all, in terms of sequential ARR, as we all know, we only formally report ARR half-year and full year, but we did exit FY 2024 with strong ARR growth of 11%. Q1, we've seen sequential growth of around 2%. And that's broadly in line with Q1 FY 2024, so it's a strong start to the period. It's in line with our plan, and it very much underpins the revenue guidance that we've given. Seasonality, there's not too much seasonality in our business, but noticeably, you know, towards the end of the Q1 period, around the holiday season, we do see at times a slight softening in demand and sales execution. Thank you.
Thank you.
Thank you. We are now going to proceed with our next question, and the questions come from the line of Frederic Boulan from Bank of America. Please ask your question.
Hey, good morning, Jonathan. If I can ask about your AI pipeline. I mean, you've kind of talked about the traction you've seen on all the pilots you've done. If you can expand a little bit on the pricing strategy, traction you expect, and any kind of impact on your growth. I mean, when do you think that's gonna be a material driver in for the business? And then, I mean, you commented on competition. I mean, no material change there. Can you maybe double-click a bit on what Intuit is doing, especially in the U.S. with their 14 SMBs? I mean, that potentially is a large pool of customers that's gonna be that Intuit is trying to keep, as a graduate, as you call it.
So can you discuss a little bit if you felt a bit less inflow of customers from that source of growth? Thank you.
Yes, thank you, Frederic. First of all, on Copilots and ARR, we're very pleased with the progress there. As we've said previously, it's already available in an early adopter form. We have now 11,000 active users, and that's across several key products in the U.K., which is Sage Accounting, Sage 50, and Sage Intacct. We're experiencing very good levels of traction with customers as we further scale and develop the solution. During FY 2025, we are going to incorporate Sage Copilots into our premium product tiers in the U.K. I think just in terms of timeframe, we're starting with Sage Accounting, which we're starting in the next couple of months, and then we'll follow with Sage 50 and Sage Intacct later in the year.
Just earlier this week, we have written to customers to notify them that if you are a customer in Sage Accounting Plus, which is the premier tier for Sage Accounting, we will include Copilots together with other features. And in terms of pricing for existing customers, that will increase their average monthly installment by GBP 10 per month or 25%. We, you know, this is a small part of our revenue stream, Sage Accounting in the U.K., but it's indicative of the traction that we're getting and the confidence that we have in the fair value transfer that we have with regards to Copilots. And then Intuit North America, yes, they are, you know, they have a product which is really aimed to reduce the migration from QuickBooks to Sage Intacct.
We have not seen an impact of that in North America. We are very strong in our verticals. We're very good brand, and customer recognition. It's a very large economy in the U.S., and we have not seen any deterioration in the pipeline or deal completion in North America. Thank you, Frederic.
Thank you very much.
We are now going to proceed with our next question. The questions come from the line of Charles Brennan from Jefferies. Please ask your question.
Hey, Jonathan. Thanks for taking the question. Can I just ask a number question, actually? It looks like the Q1 FX headwinds that you faced are greater than I'm modeling for H1 as a whole. If I just look at consensus, I think the implied Q2 is close to GBP 630 million, which is perhaps a bigger sequential step up than we normally see. I haven't got round to modeling the quarterly FX phasing in detail, but just to save me the trouble, is there a sufficient FX reversal in Q2 that leaves you comfortable with H1 consensus, or are we mismodeling the FX trends in H1? Thank you.
Charlie, thank you. You're right. So in short, the Q1 headwinds from currency from FX was about 3%. The Q2 though that will turn into as we sit here today at the end of January that will turn into a small tailwind. And you know obviously we'll keep you posted as we go through the year quarter by quarter. You know you touched on guidance for the half-year and full-year. When we guide to the full year, we've entered FY 2025 with good momentum. Q1 was a strong performance, as you can see, in line with our plan. We are confident in our full-year guidance. It's based on the deal closure rate that we've got at the moment and also on the pipeline. And that leaves us, as we sit here today, to be very comfortable with consensus with total revenue growth, currently sitting at 9.2%.
But as I said, you know, we will update you during the course of the year. Thank you.
Thank you.
We are now going to proceed with our next question. And the question comes from the line of Balajee Tirupati from Citi. Please ask your question.
Hello, good morning. Thanks for taking my question. Two from my side, if I may. Firstly, could you comment on potential impact from U.K. mandating the report of benefits in kind via payroll software? Are you expecting this to support Sage Payroll momentum in the region? And second question is, follow-up on North America. Could you share any incremental color on how the client purchase behavior has evolved since the U.S. election, and if you are seeing any changes in pipeline build there? Thank you.
In terms of the second question, you know, is there any change in the macro in the U.K since the election? We, you know, as I said right up front, you know, operate across sort of a suite of sort of major European and North American economies. If you take them as a whole, we haven't seen a material change from the second half of last year. You asked around the U.K., we have not seen an impact yet. Don't forget, though, that the pipeline for a Sage Intacct sale, which is a significant driver of growth now in the U.K., is about three months. So we much rather look at, you know, sort of sales performance, lead generation on a quarter-by-quarter basis, which gives us a much more reliable underlying trend.
And then in terms of, you know, mandating of digitization of reporting by governments, whether in the U.K. or elsewhere, we, you know, that is an underlying secular trend, across all of our major territories. Each incremental change that governments make clearly is a tailwind to us. We will, from time to time, call out where there is a significant or material opportunity that would drive accelerated growth. This is not one of those. It is part of the secular trend of digitization, not only of our customers' back offices, but the way they interface with government, tax authorities, and other regulatory bodies. Thank you. Thank you, Balajee.
Thanks for answering the question. Actually, the first question was more around U.S. election, so are you seeing any changes in the states after elections in November?
Not, not yet in terms of, you know, execution of opportunities through the sales pipeline, or, or sales, you know, or sales completion. But, but I do say, you know, Sage Intacct, it is a three-month, it is a three-month sales cycle effectively.
Very clear. Thanks a lot.
In the interest of time, we are now going to proceed with one last question, and the questions come from the line of Michael Briest from UBS. Please ask your question.
Great. Good morning, Jonathan and James. In terms of headcount last year, your margins were good, and headcount fell by about 5%. Just wonder if you can give some detail on where you found the efficiencies and whether you think that's a number that could continue to trend lower this year. Then just very quickly, can you give an update on Sage Active and take up in Europe, where it sits, if you like, in the product portfolio relative to the historical products like Sage 50 and 100? Thank you.
Michael, thanks very much. Then in terms of headcount, you're absolutely right. In the course of FY 2024, we saw a reduction of about 5% down to 11,000 total headcounts as we exited last year. Those savings were made across the piece. You know, first of all, we focused on very careful measured hiring plans to ensure that we were allocating the resources exactly in the right areas of business. And then secondly, you know, a careful continuous refinement of the shape of the P&L that we want between various functions and regions. So no sort of standout big redundancy programs or big pivots in our headcount, but a very clear focus on the number and quality of the hiring that we were doing. In terms of going forward, we've now had, you know, two years with the headcount flat and decreased by 5%.
We're growing the business at around 10%. So we do anticipate that the headcount will begin to move up during the course of FY 2025. But I can reassure you that that headcount increase and the total cost of employment for us is about 70% of our total cost base. I can assure you that that will increase at a significantly slower rate than total revenue. And then in terms of Sage Active, very, you know, early signs are promising. It's, as you know, in all of our new cloud products in new territories, it takes two or three years before traction really builds. So it's not material at this stage. The customer base is beginning to become familiar with it. Our sales teams, you know, are working with it.
But it's just like Sage Intacct in the U.K., where if you recall, the first two or three years, it was a slow pickup, a careful pickup. And then once you get past the two to three-year mark, there was accelerated growth. And you know, we called out the numbers for Sage Intacct in the U.K. at the end of last year. And that's a very significant pickup that we saw. So, we'll keep you updated, but nothing material to report at this stage. Thank you.
Thank you.
We will now end the question-and-answer session due to the time constraint, and I would now like to hand back to Mr. Howell for closing remarks.
As ever, thank you for your time. Thank you for your good questions. And James and the team, as always, will be available over the next few days to take any follow-up questions, that you would like to raise. Thank you very much indeed. Goodbye.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.