Q3 SaaS multiples holding steady at ~6x

SaaS multiples have continued to show stability and are in line with 2014 to 2018 multiples. Of the 111 publicly traded SaaS companies we follow, the median multiple is 5.65x revenue while the average is 6.44x. The gap between the average and median is only 0.8x, meaning premium SaaS companies are getting slightly higher valuations, but that gap is tight relative to 2020 and 2021 when it was ~5.8x. There has been a correction in overvalued names.

Multiples for SaaS companies growing above the median of 21% are stronger: 7.57x on median and 8.52x on average. Only 23% of companies are trading at 10x revenue or greater, whereas the peak was 60% in Q4 2020. One company trades above 20x whereas 35 traded above 20x in Q4 2020. The data is below.

Additional observations are as follows:

The stats. The median SaaS business had trailing twelve month revenue of $637mm, EBITDA of -$34mm, but positive operating cash flow of $66mm thanks to up-front collections on annual contracts. YOY growth is 19% on median and average. The median EBITDA margin is -5%. Debt is negligible. While 65 of the companies have negative EBITDA, only 29 have negative cash flow.

The trend. The chart below shows median revenue multiples we’ve collected since Q4 2014. During that period, the median SaaS multiple has ranged from 4.6x to 14.1x with an average of 8.0x.

Premium gets a premium. Premium SaaS businesses trade at premium multiples, but the number of premiums is shrinking. In the data set, 25 companies trade at greater than 10x+ revenue, 5 trade at greater than 15x, and only 1 trades greater than 20x.

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