SaaS multiples in Q2 continue to be soft, but we are seeing “premium” SaaS command stronger multiples. Of the 87 publicly traded SaaS companies we follow, the median multiple was 5.90x revenue while the average was 8.62x. Multiples for SaaS companies growing above the median of 15% are much stronger: 8.98x on median and 12.32x on average. The widening gap in the average and median of the entire dataset, as well as the large gap between higher growth and the entire dataset, indicate a real divergence between premium SaaS and overall SaaS. The data is below.
Additional observations are as follows:
The heyday of 2020 has not returned, and probably won’t. 22% of companies are trading at 10x revenue or greater, whereas the peak was 60% in Q4 2020. 3 companies trade above 20x whereas 35 traded above 20x in Q4 2020. Additionally, the gap between the average and median is 2.7x, meaning premium SaaS companies are getting higher valuations and that gap is up from Q1 when it was 2.2x. Note however the gap was really wide in 2020 and 2021 at ~5.8x.
The stats. The median SaaS business had trailing twelve month revenue of $994mm, EBITDA of $33mm, and positive operating cash flow of $185mm thanks to up-front collections on annual contracts. YOY growth is 15% on median. The median EBITDA margin is 4%. Debt is negligible. While 36 of the companies have negative EBITDA, only 3 have negative cash flow.
The trend. The chart below shows median revenue multiples we’ve collected since Q4 2014. The dotted line is a trendline. During the period shown, the median SaaS multiple has ranged from 4.60x (Q4 2015) to 14.1x (Q4 2020).
Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 19 companies trade at greater than 10x+ revenue, 11 trade greater than 15x, and 3 trade greater than 20x.
Removals. We’ve removed companies that continue to show extreme distress. They have a combination of distressed valuations, no growth, and/or no profitability. They should not be used to assess multiples for a healthy company going through M&A. More recent removals include LivePerson, Brightcove, Upland, Viant, ON24, ZipRecruiter, Yext, Secureworks, Instructure, Expensify, and Fastly (UiPath is on watch).
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