Q2 SaaS Metrics
We keep close track of every SaaS IPO in the past five years (since MongoDB in October 2017). Those 67 companies have finally all issued their Q2 2022 earnings. Below we summarize key financials and metrics.
Median quarterly revenue of $102mm. Median and average revenue of the 67 companies was $102.5mm and $171.1mm respectively. Annualized, that’s $410mm and $684mm 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.
YOY growth of 30%. Median and average YOY growth was 30% and 34% respectively. Given the size of these SaaS businesses, that is fantastic growth. However, note that growth is slowing: year over year growth in Q1 2022 was 36% and 41% respectively.
1 in 5 generate an operating profit. Only 19% of the companies generate an operating profit. The median operating loss is -$21.4mm and average is -$36.5mm. Those are margins of -32% and -31% respectively. There wasn’t much of a change in margin relative to Q1.
Growing efficiently. Even though these companies generate a loss, they are adding new revenue at a very efficient pace. On median the companies are adding $0.70 of new revenue for every dollar of loss. That means so long as net dollar retention is over 100%, the payback on median is 1.4 years. That’s outstanding. 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 We do not quote the average here ($2.56) because it is skewed by outliers.
Revenue to loss ratio. The median revenue to loss ratio is 2.61x. In other words, for every dollar of loss, the companies generate at least $2.61 of revenue. It’s a healthy ratio given the efficient growth, strong net dollar retention, and quick payback periods of the growth.
Only 53% report their NDR. Of the 67 SaaS companies we follow, only 53% of them (35 companies) report their net dollar retention in their quarterly filing. Nearly none report gross dollar retention.
Median NDR of 125%. Median net dollar retention for those companies reporting is 125% and the average is 122%. 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 20%+ YOY even after accounting for downgrades and churn.
Adjusted median NDR is 100%. Since only 53% of the SaaS companies we follow actually share their net dollar retention, this data is highly subject to reporting bias whereby some companies with poor net dollar retention simply may not be reporting it. As such, we believe the median net dollar retention of 125% needs to be adjusted down. We do this by assuming those that didn’t report net dollar retention are experiencing NDR of 100% (this may be generous). Assuming the 31 non-reporting companies have NDR of 100%, the median and average net dollar retention of the entire dataset is 100% and 110% respectively. Again, strong numbers.
Comparison to historical data. Below we compare Q2’s median to historical medians we have collected. Note the drop in growth in Q2 versus Q1.
Sammy is the Managing Partner and Co-Founder of Blossom Street Ventures. Visit us at blossomstreetventures.com and email directly at email@example.com. We invest in companies with run rate revenue of $3mm to $30mm, with year over year growth of 20% to 100%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $4mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.