The gap between the average and median is 3.6x, meaning premium SaaS companies are getting outlier valuations, but that gap is lowest since Q1 2020, showing the correction in overvalued names. 47% of companies are trading at 10x revenue or greater. The data is below.
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 8.5x.
Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 58 companies trade at greater than 10x revenue, 35 trade at greater than 15x, and 22 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 $452mm of cash on the balance sheet on median, plenty relative to annual burn (recall EBITDA is -$32mm). The number of years of cash on the balance sheet is less important given that these businesses are generally cash flow positive (median of $41mm); only 35 out of the 123 companies have negative cash flow. Note that 67 out of the 123 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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