Q1 SaaS metrics show stabilizing trends
We keep close track of every SaaS IPO in the past five years (since MongoDB in October 2017). Those 62 companies have all now issued their Q1 2024 earnings reports. Below we summarize key financials and metrics. All this data as well as historical quarterly data can be seen on out website as well (blossomstreetventures.com).
Median quarterly revenue of $167mm. Median and average revenue in Q1 was $167mm and $239mm respectively. Annualized, that’s $669mm and $960mm respectively. These companies are quite large and note that revenue does include services which tends to be a small line item for most SaaS companies. Q4 2023, Q3, 2023, Q2 2023, Q1 2023, Q4 2022, Q3 2022, Q2 2022, and Q1 2022 medians were $154mm, $154mm, $145mm, $133mm, $130mm, $118mm, $103mm, and $102mm respectively.
YOY growth of 19%. Median and average YOY growth was 19% and 17% respectively. Given the size of these SaaS businesses, that is good growth. While it’s down materially from a high of 36% in Q1 2022, the growth seems to be stabilizing: Q4 2023, Q3 2023, Q2 2023, Q1 2023, Q4 2022, Q3 2022, Q2 2022, and Q1 2022 medians were 20%, 18%, 20%, 21%, 27%, 29%, 30%, and 36% respectively, so growth is slowing.
37% generate an operating profit. 37% of the companies generate an operating profit. The median operating loss is -$12mm and average is -$33mm. Median and average margins are -11% and -21% respectively. Note the averages are being skewed materially by RBRK which had a net loss of -$724mm in the quarter. Medians in Q4 2024, Q3 2023, Q2 2023, Q1 2023, Q4 2022, Q3 2022, Q2 2022, and Q1 2022 were -18%, -18%, -20%, -20%, -21%, -26%, -32% and -30% respectively. Margins are improving while growth is slowing.
Growing efficiently. Even though these companies generate a loss, they are adding new revenue at an efficient pace. On median the companies are adding $0.88 of new revenue for every dollar of loss. That means so long as net dollar retention is over 100%, the payback on median is 1.14 years. That’s very good . So long as your payback period on new revenue is inside of 2 years and you’re retaining the client forever (100%+ NDR), your investors should be happy to see you burn cash to grow ARR. We do not quote the average because it is subject to skew.
Revenue to loss ratio. The median revenue to loss ratio is 5.61x. In other words, for every dollar of loss, the companies have $5.61 of revenue. It’s a healthy ratio given the efficient growth, strong net dollar retention, and quick payback periods of the growth.
47% reported their NDR. Of the 62 SaaS companies we follow, 29 of them reported their net dollar retention in their quarterly filing.
Median NDR of 112%. Median net dollar retention for those companies reporting is 112% and the average is 110%. These are very strong retention metrics in SaaS. If you’re anywhere near that, you’re doing very well. It means the current customer base is a source of growth, growing 12%+ YOY even after accounting for downgrades and churn. Medians in Q4 2023, Q3 2023, Q2 2023, Q1 2023, Q4 2022, Q3 2022, Q2 2022, and Q1 2022 were 111%, 112%, 115%, 115%, 115%, 123%, 125%, and 120% respectively. Retention is down materially.
Comparison to historical data. Below we compare Q4’s median to historical medians we have collected. Note the drop in growth and retention over time, however both appear to have stabilitzed. Also note the improvement in margin, cash efficiency, and payback period. Finally, while we show ‘Rule of 40’, we believe it’s a useless and antiquated rule (that’s another blog).
Thank you for the readership. Visit blossomstreetventures.com for more blogs and SaaS data. Email the author at sammy@blossomstreetventures.com.
