Travel marketplaces down to 2.6x. Multiples hit 10.6x in Q2 2021 which is remarkable for a business that traditionally trades no greater than ~3x. Booking.com is trading at 4.5x.
Labor intensive space. The only reason we even include these companies in our analysis is because investors like Softbank insist on labelling these services businesses as tech co’s. At best, they’re tech enabled which isn’t the same thing at all. Remember when Groupon was a high flier? Well today it’s shrinking (-37% YOY growth) and trades at 0.4x revenue. Cash on the books represents nearly the entire the market cap. This was one of the fastest growing companies ever that came up during the recession of ’08, and now no one cares. Redfin and Opendoor have been decimated over time. Redfin and Compass don’t make money, which is a very dangerous place to be for services businesses of their size.
Rideshare multiples crushed. Lyft is at 1.1x revenue while Uber is at 2.6x revenue. We suspect the revenue multiple for both would be higher, but both businesses light cash on fire. Lyft’s EBITDA margin is -23% and Uber’s is -6%. It’s hard to envision either company generating cash any time in the near future given their current market share and very high levels of burn, and keep in mind food delivery saved Uber during 2020. Bird is trading at 0.8x as their business model is broken and they seem headed to insolvency.
Gaming. The median revenue multiple of 5.3x is strong. SciPlay is a mess while Roblox cratered to 9.5x from a high of 42x. In 2021 Roblox got hit with a $200mm lawsuit over music rights (June 2021).
Hardware is down to 1.1x. Roku has fallen the most. Apple’s growth is 12%, very strong for a company with $387bln in annual sales and a 33% margin.
Multiples for SaaS companies growing above the median of 21% are better: 8.2x on average and 6.3x on median.
The trend. The chart below shows median revenue multiples we’ve collected since Q4 2014. During that period, the median SaaS multiple has ranged from 4.6x to 14.1x with an average of 8.4x.
Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 27 companies trade at greater than 10x revenue, 13 trade at greater than 15x, and only 6 trade at greater than 20x.
SaaS businesses are healthy. There is almost no debt on these businesses as banks don’t like ‘asset-lite’ businesses like software. Additionally, these companies have $439mm of cash on the balance sheet on median, plenty relative to annual burn (recall EBITDA is -$46mm). The number of years of cash on the balance sheet is less important given that these businesses are generally cash flow positive (median of $33mm); only 40 out of the 121 companies have negative cash flow. Note that 76 out of the 121 have negative EBITDA, but again that’s acceptable so long as the growth is present and cash flow overall is positive.
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