Tech multiples are trending lower

Every quarter we track the multiples for tech companies in various spaces including Social, Marketplaces, Content Distributors, Gaming, E-commerce, Payments, and New Hardware.  The multiples acquirers and VC pay for your business are ultimately driven by what’s happening in the public markets, so knowing the multiples in your industry is important.  Below is the data.  Generally the multiples have come in, although certain sectors have remained stable.   

 

    TTM TTM  EBITDA TTM  Enterprise Market         Q3 2016 Q2 2016 Q1 2016
Name Ticker Revenue EBITDA Margin FCF Value Cap Debt Cash EV Calc   Multiple Multiple Multiple
Social                            
Facebook FB $24,670 $12,860 52% $12,580 $305,450 $347,790 $0 $26,140 $321,650   13.04x 15.02x 15.40x
Line Corp LN $1,150 $165 14% $202 $6,280 $7,900 $2 $1,110 $6,792   5.91x 7.59x ---
Linkedin LNKD --- --- --- --- --- --- --- --- ---   --- 6.89x 7.29x
Twitter TWTR $2,520 $42 2% $666 $9,530 $12,120 $1,650 $3,660 $10,110   4.01x 4.70x 3.22x
                             
Median   $2,520 $165 14% $666 $9,530 $12,120 $2 $3,660 $10,110   5.91x 7.24x 7.29x
                             
                             
                             
Marketplaces                            
Priceline PCLN $10,390 $4,010 39% $3,700 $75,310 $74,200 $7,350 $4,380 $77,170   7.43x 7.57x 7.40x
eBay EBAY $8,910 $3,030 34% $3,250 $34,180 $33,550 $9,030 $8,050 $34,530   3.88x 4.04x 3.34x
Sabre SABR $3,300 $718 22% $557 $10,120 $6,920 $3,450 $325 $10,045   3.04x 3.29x 3.40x
TripAdvisor TRIP $1,470 $182 12% $320 $6,130 $7,170 $96 $727 $6,539   4.45x 5.66x 5.98x
Shutterstock SSTK $480 $65 14% $103 $1,380 $1,700 $0 $290 $1,410   2.94x 3.97x 3.00x
Match Group MTCH $1,170 $320 27% $252 $5,340 $4,580 $1,220 $231 $5,569   4.76x 4.09x NA
IAC IAC $3,180 $390 12% $327 $5,410 $5,500 $1,640 $1,370 $5,770   1.81x 1.54x 1.45x
Expedia EXPE $8,380 $1,020 12% $1,370 $18,310 $17,210 $3,210 $1,890 $18,530   2.21x 2.34x 2.39x
Etsy ETSY $343 $37 11% $38 $1,050 $1,430 $12 $270 $1,172   3.42x 4.16x 2.77x
Lending Club LC $506 $0 0% $14 $1,550 $2,230 $0 $521 $1,709   3.06x 3.09x 2.54x
Angie's List ANGI $333 $19 6% $4 $507 $482 $58 $38 $502   1.51x 1.67x 1.27x
Zillow Z $788 $6 1% -$46 $6,370 $6,520 $230 $445 $6,305   8.00x 8.08x 8.30x
Groupon GRPN $3,130 -$8 0% $71 $1,440 $2,100 $230 $690 $1,640   0.52x 0.83x 0.00x
GrubHub GRUB $456 $105 23% $94 $2,920 $3,150 $0 $297 $2,853   6.26x 7.03x 5.72x
Care.com CRCM $156 $4 3% $11 $176 $246 $0 $71 $176   1.13x 1.59x 1.55x
                             
Median   $1,170 $105 12% $103 $5,340 $4,580 $230 $445 $5,569   3.06x 3.97x 2.89x
                             
                             
                             
Content Distributors                            
Yahoo! YHOO $4,970 $90 2% $1,130 $31,580 $39,440 $1,280 $6,600 $34,120   6.87x 7.23x 6.37x
Google GOOGL $85,540 $28,290 33% $32,680 $452,850 $552,730 $3,940 $83,060 $473,610   5.54x 5.83x 5.41x
Yelp YELP $672 $6 1% $86 $2,560 $3,110 $0 $432 $2,678   3.98x 4.02x 3.04x
TrueCar TRUE $267 -$30 -11% -$4 $995 $1,110 $29 $103 $1,036   3.88x 3.12x 2.05x
WebMD WBMD $690 $177 26% $153 $1,870 $1,860 $1,040 $1,040 $1,860   2.70x 2.88x 3.54x
Netflix NFLX $8,180 $345 4% -$1,160 $54,160 $56,570 $2,370 $1,340 $57,600   7.04x 5.43x 5.43x
Pandora P $1,330 -$200 -15% -$250 $3,120 $3,040 $337 $258 $3,120   2.35x 2.41x 2.10x
                             
Median   $1,330 $90 2% $86 $3,120 $3,110 $1,040 $1,040 $3,120   3.98x 4.02x 3.54x
                             
                             
                             
Gaming                            
Activision Blizzard ATVI $5,950 $1,890 32% $2,290 $29,170 $28,200 $6,360 $4,030 $30,530   5.13x 6.05x 6.46x
Electronic Arts EA $4,550 $1,190 26% $1,150 $21,490 $23,830 $990 $3,270 $21,550   4.74x 4.98x 4.51x
Take-Two Interactive TTWO $1,520 $104 7% $190 $3,550 $4,270 $512 $1,170 $3,612   2.38x 1.98x 1.69x
Zynga ZNGA $737 -$44 -6% $36 $1,420 $2,310 $0 $871 $1,439   1.95x 1.96x 1.77x
                             
                             
Median   $3,035 $647 17% $670 $12,520 $14,050 $751 $2,220 $12,581   3.56x 3.48x 3.14x
                             
                             
                             
Ecommerce                            
Amazon AMZN $127,990 $10,960 9% $14,600 $356,950 $370,840 $18,990 $18,350 $371,480   2.90x 3.03x 3.04x
Alibaba BABA $18,030 $6,290 35% $9,140 $214,290 $235,930 $12,690 $15,990 $232,630   12.90x 13.95x 12.66x
Liberty Interactive Corp QVCA $10,320 $1,780 17% $1,090 $15,430 $9,240 $6,450 $348 $15,342   1.49x 1.54x 1.91x
Wayfair, Inc. W $3,140 -$136 -4% $80 $2,730 $3,180 $29 $293 $2,916   0.93x 1.04x 1.20x
Blue Nile, Inc. NILE $472 $16 3% $19 $435 $476 $0 $41 $436   0.92x 0.76x 0.44x
PetMed Express, Inc. PETS $240 $35 15% $35 $415 $466 $0 $52 $414   1.73x 1.54x 1.39x
Overstock.com, Inc. OSTK $1,750 $0 0% $75 $370 $443 $50 $124 $368   0.21x 0.18x 0.21x
U.S. Auto Parts Network, Inc.  PRTS $300 $9 3% $18 $126 $126 $10 $8 $129   0.43x 0.46x 0.52x
HSN, Inc. HSNI $3,590 $290 8% $213 $2,350 $1,750 $627 $67 $2,309   0.64x 0.65x 0.92x
LightInTheBox Holding Co., Ltd. LITB $285 -$9 -3% -$21 $117 $206 $0 $88 $118   0.41x 0.42x 0.46x
                             
Median   $2,445 $26 6% $78 $1,393 $1,113 $39 $106 $1,373   0.93x 0.90x 1.06x
                             
                             
                             
Payments                            
Square SQ $1,630 -$71 -4% $67 $4,290 $5,130 $0 $514 $4,616   2.83x --- ---
                             
                             
                             
New Hardware                            
TiVo Corporation TIVO $546 $181 33% $120 $3,180 $2,440 $1,240 $504 $3,176   5.81x 4.90x ---
Garmin Ltd GRMN $2,940 $692 24% $651 $8,020 $9,360 $0 $1,110 $8,250   2.81x 2.73x 2.52x
GoPro GPRO $1,080 -$341 -32% -$100 $999 $1,310 $0 $225 $1,085   1.00x 1.22x 0.74x
Fitbit FIT $2,310 $211 9% $24 $966 $1,760 $0 $672 $1,088   0.47x 1.12x 1.72x
Apple AAPL $215,640 $70,530 33% $65,820 $636,740 $621,800 $87,040 $67,880 $640,960   2.97x 2.62x 2.31x
                             
Median   $2,310 $211 24% $120 $3,180 $2,440 $0 $672 $3,176   2.81x 2.62x 2.02x

 

Commentary on each sector is as follows.

Social

This group includes Facebook, Line, LinkedIn, and Twitter.  As you can see, given the acquisition of LinkedIn by Microsoft, we no longer have data for LNKD.  Multiples for the group contracted substantially to a median of 5.91x in Q3 from 7.24x in the last quarter.  Facebook’s multiple really stands out thanks to its phenomenal growth, remarkable 52% margin, and $13bln of free cash flow over the last 12 months.  Indeed an overarching theme with all the companies in this blog post is that most of them generate a lot of free cash and as such command strong multiples even though their revenue isn’t recurring.      

 

Marketplaces

For marketplaces, we look at 15 different companies.  We define a “marketplace” as any business which doesn’t own the inventory it sells from plane tickets (Priceline, TripAdvisor, etc) to food (GrubHub).  Marketplaces are trading at 3.06x trailing twelve month revenue, which is a dip from last quarter but slightly higher than Q1. 

 

Content Distributors

Content distributors consists of 7 companies whose end product is strictly content.  This segment of the market has remained stable over the past 3 quarters, trading at 3.98x on median in Q3.

 

Gaming

In gaming we monitor 4 businesses.  This is a sector trending better than the rest with the median climbing over the past three quarters from 3.14x to 3.56x.  The margin is also quite high at 17%.

 

Ecommerce

E-commerce continues to be the whipping boy of tech enabled businesses.  The space trades at less than 1x revenue on median although note Alibaba and Amazon receive premiums of 13x and 3x respectively. 

 

Payments

Square is the only pure payments tech company we monitor, and it trades at 2.83x revenue

 

New Hardware

Although plenty of companies make hardware such as Cannon and HP, we consider this category to be New Hardware as the 5 companies listed are less old-world and borderline IOT in some cases.  The spaces is trending up, with a median revenue multiple of 2.81x, although FitBit and GoPro continue to be valued lower at 0.47x and 1.00x respectively.  Note that hardware tends to have the best margins at 24%, which is necessary given the one-time/infrequent nature of the customer.

 

While multiples may be stable to down, they’re still attractive so now is as good a time as any to raise money.  Just make sure you’re profitable or on the path to profitability while achieving healthy growth, and you’ll be able to command a premium.  

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