PVC SaaS Index™ | Q2 2022 Update
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SaaS Multiples Are at a 4-Year Low: Where Do They Go From Here?
Practical Summary:
- Our PVC SaaS Index™ companies trades at just over 8x EV / LTM revenue, lower than at any time since the Q1 2020 market panic that followed the COVID pandemic … and around where SaaS multiples were in 2017–2018
- The median company multiple in our index is down 54% from the peak in late 2020 / early 2021; the top quartile multiple has compressed even further, by 65% (from 31x to 11x)
- If you go back to Q4 2017, you can draw a fairly flat, straight line connecting the median and top-quartile SaaS multiples over time, and valuations today just have just about fully normalized … you just have to ignore the 2020/2021 “COVID bubble” and the ensuing Q1 2022 hangover
- Even though SaaS multiples are back to early 2018, SaaS companies are performing better … with faster growth, better profitability and larger TAMs
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This post is an update in a quarterly series of posts that tracks the PVC SaaS Index™, a basket of publicly traded US-listed SaaS companies.
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This post is an update in a quarterly series of posts that tracks the PVC SaaS Index™, a basket of publicly traded US-listed SaaS companies.
Software as a Service (“SaaS”) has been around longer than the cool new “cloud.” It shares some aspects of cloud computing, but its focus tends to be clearer: SaaS is simply the delivery of software applications over the Internet from a server that’s hosted by the SaaS provider somewhere far away.
The first big SaaS IPO was Salesforce (NASDAQ: CRM) in 2004, and now we have over 120 pure-play SaaS/cloud companies in our proprietary PVC SaaS Index™, which includes:
1. Are now trading on either the NASDAQ or the NYSE: and
2. Derive the large majority of recognized revenues from long-term contractual commitments (12 months or greater), and which recognize those revenues periodically over the life of these contracts.
In this index, we have removed several SaaS companies that have gone below $1B market cap, essentially becoming broken IPOs or “zombies” in the public markets, with low liquidity / high volatility and uncertain public company prospects: Blend Labs, SumoLogic, OneSpan Inc., Agora Inc., and Weave…
