Travel marketplaces are still strong. Multiples hit 10.6x in Q2 which is remarkable for a business that traditionally trades no greater than ~3x. Multiple is in Q3 came back down to a still strong 6.8x. Booking.com is trading at an especially strong 14x and is the only company to maintain its profitability over the last 12 months ($997mm).
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 has stopped growing (-41% YOY growth) and trades at 0.4x revenue. Cash on the books represents half 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 feel especially overvalued. OpenDoor and Compass don’t make money, which is a very dangerous place to be for services businesses of their size.
Rideshare has a great multiple. Lyft is at 6.8x revenue while Uber is holding strong at 7.2x revenue. We suspect the revenue multiple for both would be higher, but both businesses light cash on fire. Lyft’s EBITDA margin is -36%. Uber’s EBITDA is -$3.5bln while Lyft is at -$1.4bln. 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.
Gaming. The median revenue multiple of 5.6x is strong. SciPlay is an underperformer at 0.3x while Roblox is at a very high 28x while being the only cash burner in the group. Roblox just got hit with a $200mm lawsuit over music rights (June 2021), which for a business with -$292mm in EBITDA could be painful. They do have plenty of cash to handle any hit ($1.7bln).
Hardware is elevated at ~6x. Hardware is at 6x, but historically traded at ~3x. Roku is the standout of the group (18x) as it’s growing at a strong 87% YOY. Peloton trades at 6.3x on 179% YOY growth thanks to covid. Apple’s growth is 30%, very strong for a company with $347bln in annual sales and a 32% margin.
The trend is still on. The chart in the picture 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 8.3x.
Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 68 companies trade at greater than 10x revenue, 54 trade at greater than 15x, and 41 trade at greater than 20x.
SaaS businesses are healthy. There is almost no debt on these businesses (except McAfee) as banks don’t like ‘asset-lite’ businesses like software. Additionally, these companies have $420mm of cash on the balance sheet on median, plenty relative to annual burn (recall EBITDA is -$7mm). The number of years of cash on the balance sheet is less important given that these businesses are generally cash flow positive (median of $48mm; only 24 out of the 120 companies have negative cash flow. Note that 65 out of the 120 have negative EBITDA, but again that’s acceptable so long as the growth is present and cash flow overall is positive.