Q4 SaaS Multiples move?higher

SaaS multiples in Q4 made a strong move up from Q3. Of the 90 publicly traded SaaS companies we follow, the median multiple was 6.53x revenue while the average was 8.90x. Multiples for SaaS companies growing above the median of 14% are stronger: 11.00x on median and 12.45x on average. These figures are big jumps from Q3 2024. The data is below.

Additional observations are as follows:

The heyday of 2020 has not returned, and probably won’t. 28% of companies are trading at 10x revenue or greater, whereas the peak was 60% in Q4 2020. 7 companies trade above 20x whereas 35 traded above 20x in Q4 2020. Additionally, the gap between the average and median is 2.4x, meaning premium SaaS companies are getting higher valuations, but that gap is tight relative to 2020 and 2021 when it was ~5.8x. Still though, these are big moves from Q3 2024, and we are very unlikely to return to 2020, absent a work-from-home resurgence and near zero interest rates.

The stats. The median SaaS business had trailing twelve month revenue of $885mm, EBITDA of $24mm, and positive operating cash flow of $178mm thanks to up-front collections on annual contracts. YOY growth is 14% on median. The median EBITDA margin is 4%. Debt is negligible. While 42 of the companies have negative EBITDA, only 6 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 5.8x (Q2 2024) to 24.0x (Q4 2020).

Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 25 companies trade at greater than 10x+ revenue, 11 trade greater than 15x, and 7 trade greater than 20x.

Removals. We’ve removed companies that continue to show extreme distress. Their valuations are very low (~1x revenue), they have no growth, no profitability, and they have very low enterprise values. 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, and Expensify.

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