Q3 SaaS Multiples Show Stability

SaaS multiples had weakened in Q3 continue to show stability at lower levels.? Of the 101 publicly traded SaaS companies we follow, the median multiple was 5.43x revenue while the average was 6.89x. ?Multiples for SaaS companies growing above the median of 22% are stronger: 7.65x on median and 9.33x on average.? The data is below.???? ??

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Additional observations are as follows:

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The heyday of 2020 has not returned.? 20% of companies are trading at 10x revenue or greater, whereas the peak was 60% in Q4 2020.? Three companies trade above 20x whereas 35 traded above 20x in Q4 2020.? Additionally, the gap between the average and median is only 1.5x, meaning premium SaaS companies are getting slightly higher valuations, but that gap is tight relative to 2020 and 2021 when it was ~5.8x.? ??

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The stats.? The median SaaS business had trailing twelve month revenue of $735mm, EBITDA of $14mm, and positive operating cash flow of $129mm thanks to up-front collections on annual contracts.? YOY growth is 22% on median.? The median EBITDA margin is 3%.? Debt is negligible.? While 47 of the companies have negative EBITDA, only 12 have negative cash flow.?

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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 7.79x.?

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Premium gets a premium.? Premium SaaS businesses trade at premium multiples, but the number of premiums is shrinking.? In the data set, 21 companies trade at greater than 10x+ revenue, 8 trade greater than 15x, and 3 trade greater than 20x. ?

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Removals.? We’ve removed certain companies that continue to show extreme distress.? Their valuations are very low (~1x revenue), they have no growth, and they have very low enterprise values. ?They should not be used to assess multiples for a healthy company going through M&A.?? These companies include LivePerson, Brightcove, Upland, and Expensify.

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Thank you for your readership.? Visit us at blossomstreetventures.com for more data and blogs, and email the author at sammy@blossomstreetventures.com.?