20211015-SEG-SEG_Snapshot_3Q21_SaaS_Public_Market_Update_32页_4mb

SEG 3Q21 SaaS Public Market Update Summary

Core Content

This document is a 3Q21 SaaS Public Market Update report by Software Equity Group (SEG), a leading M&A advisory firm specializing in B2B software companies. It provides insights into the performance of publicly traded SaaS companies, including valuation multiples, revenue growth, and financial metrics, along with notable M&A activities and market trends.

Main Points

Overview of SEG

• SEG is a leading sell-side M&A advisory firm with over 30 years of experience.
• They have advised on billions of dollars in transactions and maintain a broad network of buyers and investors.
• SEG has a strong track record of successful outcomes and client satisfaction, as reflected in their M&A Stories section.

Market Trends

• The SEG SaaS Index continues to maintain record-level valuations despite a slight softening from its 1Q21 peak.
• The median EV/Revenue multiple in 3Q21 was 13.2x, which is 50% higher than the trailing 5-year average of 8.8x.
• Companies with 40% or greater revenue growth were valued at a median 31.4x EV/Revenue.
• Snowflake, Bill.com, and Cloudflare were among the highest-valued SaaS companies in 3Q21 with multiples of 94.0x, 81.7x, and 70.6x respectively.
• The median EBITDA margin for the index remained close to breakeven, while free cash flow from operations was strong, reaching 10.7% in 3Q21.

Financial Performance

• Median TTM Revenue for the SEG SaaS Index reached nearly $600M in 3Q21.
• The weighted Rule of 40% continues to be a key performance indicator, with companies scoring 40% or greater posting a median 25.2x EV/Revenue.
• The Development Operations & IT Management and Communications and Collaboration product categories showed the largest YOY increases in median EV/Revenue.

Top and Bottom 25% of the Index

• The top 25% of the SEG SaaS Index had a median EV/TTM Revenue multiple of 34.9x, nearly three times the index median of 13.2x.
• Companies like Snowflake, Bill.com, and Cloudflare were among the top performers.
• The bottom 25% of the index had a median EV/TTM Revenue multiple of 4.1x, nearly 70% lower than the index median.
• Companies such as ChannelAdvisor and Benefitfocus were among the lower performers.

Key Information

SEG SaaS Index Composition

• The index includes 99 publicly traded SaaS companies that primarily offer solutions via the cloud and may use subscription or transaction-based pricing models.

Report Definitions

• SaaS: Software as a Service, primarily offers solutions via the cloud.
• EV: Enterprise Value.
• TTM: Trailing Twelve Months.
• YOY: Year-Over-Year.
• QOQ: Quarter-Over-Quarter.

M&A Highlights

• SEG has served as an exclusive advisor for several SaaS companies, including Widen, V-Technologies, EnergyCAP, Pharos Systems International, Mobile Doorman, Topbox, CheckpointID, Blue Mountain Quality Resources, Brandfolder, ProLease, OfficeSpace Software, Censis Technologies, PC Synergy, Procore, DynaTrace, Five9, and Investor Management Services.
• Some companies have received investments from firms like RESURGENS TECHNOLOGY PARTNERS, LEV EQUITY, and MULTIFAMILY INSURANCE PARTNERS LLC.

Financial Metrics

• EV/TTM Revenue (Median): 13.2x in 3Q21, down from 15.8x in 1Q21.
• EV/EBITDA (Median): 60.6x in 3Q21, showing a trend of decreasing multiples.
• Gross Profit Margin: 71.9% in 3Q21, with some companies showing margins over 80%.
• EBITDA Margin: -2.0% in 3Q21, indicating that most companies are still breakeven or near breakeven.
• TTM Revenue Growth: 21.4% in 3Q21, with a strong correlation to valuation multiples.
• Free Cash Flow Margin: 10.7% in 3Q21, showing a consistent performance in cash flow generation.

Visual Insights

• The report includes charts and graphs illustrating the EV/TTM Revenue vs. Revenue Growth, EV/TTM Revenue vs. EBITDA Margin, and Gross Profit Margin Distribution.
• These visuals help in understanding the relationship between financial performance and valuation multiples.

Conclusion

The 3Q21 SaaS Public Market Update highlights the continued strength and growth of the SaaS sector, with record valuations and strong performance in revenue and cash flow. SEG's expertise in M&A advisory is evident through their extensive network and successful deal execution, contributing to the overall market dynamics. The report serves as a valuable resource for understanding current market trends and financial health of SaaS companies.