Q3 2024 SaaS Operating Margins

SaaS companies continue to burn less cash. Every quarter we look at the operating income and margin of every SaaS company that has IPO’d since October 2017 (62 active companies). The data is below and shows that operating margin and loss continues to improve.

Margin has really improved. In Q1 2022, operating margin on median was -30%. Since then, the margin has improved trending to -6% as of Q3 2024.

Operating loss has also improved. In Q1 2022, operating loss on median was a high of -$19.8mm. Operating loss in Q3 2024 was -$11.9mm, even as these companies are growing. Of course, improvements in margin have come at the cost of YOY growth, which on median was 18% in Q2 2024 versus 30% in Q1 2022.

Profitability is up. Out of the 62 companies shown, 40 of them were unprofitable. That’s 65% of the dataset, which in an improvement versus Q1 2022, when the 82% were unprofitable.

If the goal is profitability, it will be a long haul. The first dollar of cost is much easier to cut than the last dollar, and we do expect gains in operating margin to slow. We do not expect the sector to attain significant profitability on median, but the efficiency at which these companies grow will continue to improve. Those that cant improve to an acceptable level will likely be acquired at attractive valuations.

Thank you for your readership. Visit us at blossomstreetventures.com for more SaaS data and blogs. Email the author at sammy@blossomstreetventures.com