Q4 2016 SaaS Profile: 5.5x revenue, 31% growth, -9% EBITDA margin

We just completed our quarterly review of publicly traded SaaS businesses.  Below is the data and a break down of our key observations:

 

    TTM TTM  TTM  Enterprise Market         EBITDA YOY   Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014
Name Ticker Revenue EBITDA FCF Value Cap Debt Cash EV Calc   Margin Rev Growth   EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev
2U TWOU $206 -$19 $5 $1,740 $1,930 $8 $169 $1,769   -9% 37%   8.59x 6.43x 8.91x 6.52x 5.84x 5.56x 10.48x 8.83x 7.58x
Athenahealth, Inc. ATHN $1,080 $107 $183 $4,670 $4,490 $291 $147 $4,634   10% 17%   4.29x 4.23x 5.07x 5.26x 5.49x 6.90x 6.51x 6.14x 6.26x
Bazaarvoice, Inc. BV $202 -$8 $5 $308 $354 $37 $83 $308   -4% 2%   1.52x 1.77x 2.26x 1.27x 0.99x 1.62x 1.90x 2.15x 2.19x
Benefitfocus, Inc. BNFT $233 -$21 -$23 $894 $853 $101 $57 $897   -9% 26%   3.84x 4.03x 5.54x 5.34x 5.02x 6.41x 6.46x 6.06x 7.63x
Box, Inc. BOX $399 -$115 -$1 $2,040 $2,110 $75 $177 $2,008   -29% 42%   5.04x 5.05x 5.27x 4.39x 4.54x 5.92x 6.29x 7.72x 8.14x
BroadSoft, Inc.  BSFT $341 $33 $67 $1,150 $1,170 $201 $219 $1,152   10% 22%   3.38x 3.68x 4.21x 4.10x 3.80x 3.95x 3.63x 4.16x 4.12x
Castlight Health, Inc.  CSLT $102 -$54 -$37 $291 $416 $0 $115 $302   -53% 36%   2.97x 4.26x 3.47x 3.54x 1.92x 3.15x 6.59x 11.38x 12.16x
Cornerstone OnDemand, Inc. CSOD $423 -$46 $35 $2,080 $2,120 $238 $302 $2,056   -11% 24%   4.86x 5.75x 6.51x 5.58x 4.32x 5.93x 6.75x 2.05x 3.25x
Five9, Inc.  FIVN $162 $2 $7 $916 $916 $46 $58 $904   1% 26%   5.58x 4.80x 5.58x 3.67x 3.17x 2.38x 1.65x 6.20x 5.74x
Hortonworks, Inc. HDP $184 -$244 -$82 $363 $670 $0 $85 $585   -132% 51%   3.17x 2.62x 2.49x 3.85x 3.84x 6.74x 11.26x 6.91x 6.84x
HubSpot, Inc. HUBS $271 -$39 $19 $2,060 $2,160 $1 $114 $2,047   -14% 49%   7.55x 6.41x 8.56x 7.32x 6.08x 14.04x 9.27x 3.51x 3.11x
IntraLinks Holdings, Inc. IL --- $0 --- --- --- --- --- ---   --- ---   --- 2.78x 2.17x 1.72x 1.70x 2.08x 2.24x 12.40x 12.43x
Jive Software, Inc. JIVE $204 $0 $4 $238 $346 $1 $109 $238   0% 4%   1.16x 1.19x 1.12x 0.93x 0.71x 1.47x 1.07x 2.98x 2.98x
Lifelock LOCK --- $0 --- --- --- --- --- ---   --- ---   --- 3.24x 2.24x 1.66x 1.32x 1.80x 0.79x 2.33x 2.35x
LivePerson Inc. LPSN $223 $9 $25 $351 $398 $0 $51 $347   4% -7%   1.56x 1.68x 1.86x 1.47x 0.90x 1.65x 1.96x 5.88x 6.56x
LogMeIN, Inc. LOGM $336 $41 $92 $4,960 $5,280 $30 $196 $5,114   12% 24%   15.22x 7.16x 6.83x 4.64x 4.09x 5.66x 5.22x 20.10x 16.16x
Marin Software, Inc. MRIN $100 -$6 $6 $44 $76 $3 $34 $45   -6% -8%   0.45x 0.56x 0.59x 0.47x 0.69x 1.10x 0.85x 13.77x 9.72x
Medidata Solutions, Inc. MDSO $463 $66 $89 $3,230 $3,660 $263 $375 $3,549   14% 18%   7.66x 6.53x 7.46x 6.18x 4.87x 5.80x 7.19x 2.40x 2.44x
MobileIron, Inc. MOBL $164 -$62 -$12 $246 $386 $0 $90 $296   -38% 10%   1.80x 1.66x 2.03x 1.03x 1.10x 1.56x 1.41x 1.72x 1.51x
New Relic, Inc. NEWR $243 -$54 $11 $1,890 $2,080 $0 $196 $1,884   -22% 50%   7.77x 6.09x 8.69x 6.56x 6.91x 10.64x 10.84x 2.28x 2.18x
Proofpoint, Inc. PFPT $376 -$42 $94 $3,250 $3,200 $367 $397 $3,170   -11% 42%   8.44x 8.93x 9.85x 8.10x 6.49x 10.79x 9.46x 9.40x 13.37x
Qualys, Inc. QLYS $198 $48 $68 $1,100 $1,340 $0 $244 $1,096   24% 21%   5.54x 5.00x 6.25x 4.99x 3.83x 6.77x 5.44x 2.08x 2.69x
RealPage, Inc. RP $568 $81 $136 $2,790 $2,890 $122 $105 $2,907   14% 21%   5.12x 4.52x 4.16x 3.67x 3.49x 3.56x 3.34x 5.84x 5.18x
RingCentral, Inc. RNG $380 -$11 $30 $1,890 $2,040 $15 $160 $1,895   -3% 28%   4.99x 4.00x 4.72x 4.00x 3.85x 5.23x 4.23x 1.55x 1.58x
salesforce.com, Inc.  CRM $8,390 $505 $2,160 $60,630 $59,760 $2,710 $2,210 $60,260   6% 33%   7.18x 6.22x 6.65x 8.03x 7.25x 8.85x 7.30x 7.09x 6.55x
ServiceNow, Inc. NOW $1,390 $69 $160 $14,090 $14,320 $508 $401 $14,427   5% 38%   10.38x 9.50x 10.68x 10.09x 7.85x 13.58x 12.52x 8.48x 7.60x
Splunk, Inc. SPLK $950 -$300 $202 $7,430 $8,250 $86 $1,080 $7,256   -32% 59%   7.64x 7.15x 8.66x 9.26x 6.63x 11.80x 13.40x 2.60x 4.10x
SPS Commerce, Inc. SPSC $193 $19 $19 $878 $1,010 $0 $139 $871   10% 22%   4.51x 5.71x 6.39x 4.66x 3.70x 7.02x 6.88x 12.40x 12.68x
The Ultimate Software Group, Inc. ULTI $781 $68 $160 $5,800 $5,830 $9 $89 $5,750   9% 26%   7.36x 7.15x 8.32x 8.55x 7.34x 9.83x 8.61x 13.68x 13.99x
Veeva Systems Inc. VEEV $544 $122 $144 $6,590 $7,060 $0 $519 $6,541   22% 42%   12.02x 10.15x 10.88x 9.37x 7.10x 8.11x 7.76x 10.64x 10.98x
Wix.com Ltd. WIX $290 -$39 $41 $3,250 $3,250 $0 $171 $3,079   -14% 42%   10.61x 6.72x 7.11x 4.25x 3.16x 4.28x 4.06x 8.65x 10.43x
WorkDay, Inc. WDAY $1,570 -$274 $349 $1,538 $1,661 $534 $2,000 $195   -17% 47%   0.12x 8.46x 12.37x 11.95x 9.19x 14.00x 13.50x 3.22x 3.69x
Zendesk, Inc. ZEN $312 -$84 $25 $2,410 $2,640 $0 $225 $2,415   -27% 49%   7.74x 6.64x 10.18x 8.36x 6.38x 9.29x 8.98x 3.66x 3.81x
Secureworks SCWX $430 -$27 -$7 $607 $721 $0 $117 $605   -6% 36%   1.41x 1.83x 2.27x 3.37x --- --- --- --- ---
Appfolio, Inc. APPF $106 -$5 $12 $844 $870 $0 $26 $844   -4% 41%   8.00x 7.73x 7.01x 5.43x 9.69x --- --- --- ---
Atlassian Corporation TEAM $531 -$1 $159 $6,170 $6,970 $0 $795 $6,175   0% 37%   11.62x 9.48x 12.55x 9.65x 11.05x --- --- --- ---
Twilio TWLO $277 -$34 $10 $2,050 $2,450 $0 $306 $2,144   -12% ---   7.73x 8.34x 23.42x --- --- --- --- --- ---
Instructure INST $111 -$50 -$22 $591 $658 $0 $68 $589   -45% ---   5.31x 4.71x 7.06x 5.28x 6.40x --- --- --- ---
Mindbody, Inc MB $139 -$14 -$4 $1,020 $1,080 $15 $86 $1,010   -10% ---   7.26x 6.25x 5.91x 4.06x 4.65x --- --- --- ---
Shopify SHOP $398 -$27 $14 $5,750 $6,200 $0 $395 $5,805   -7% ---   14.57x 10.36x 12.58x 9.40x 11.59x --- --- --- ---
Xactly XTLY $95 -$12 -$3 $333 $362 $13 $42 $334   -13% ---   3.50x 3.44x 4.85x 3.39x 2.88x --- --- --- ---
Nutanix NTNX $603 -$289 $29 $2,260 $2,650 $0 $355 $2,295   -48% ---   3.80x 6.48x --- --- --- --- --- --- ---
Apptio APTI $161 -$22 -$4 $367 $435 $0 $79 $356   -14% ---   2.22x --- --- --- --- --- --- --- ---
Blackline BL $123 -$16 -$5 $1,430 $1,530 $1 $105 $1,426   -13% ---   11.58x --- --- --- --- --- --- --- ---
Coupa Software COUP $134 -$31 -$21 $1,020 $1,240 $0 $202 $1,038   -23% ---   7.76x --- --- --- --- --- --- --- ---
                                             
                                             
                                             
                                             
Average   $567 -$17 $96 $3,757 $3,903 $132 $300 $3,735   -11% 30%   6.11x 5.44x 6.65x 5.28x 4.87x 6.29x 6.30x 6.61x 6.67x
Median   $277 -$14 $19 $1,740 $1,930 $1 $160 $1,769   -9% 31%   5.54x 5.73x 6.39x 4.83x 4.54x 5.92x 6.51x 6.06x 6.26x

 

 

-On median and average, SaaS is trading at 5.5x and 6.1x trailing twelve month revenue.  These multiples are in line with historical trends – SaaS tends to trade between 4x and 6x.  During the recession it dropped as low as 2x and as recently as 2014 the multiple has been over 8x.  

 

 

-Of the 43 companies we monitor, 30 of them are not EBITDA positive.  On median the EBITDA margin is an anemic -9%.  Note that the picture is prettier when looking at actual cash flow: only 12 are burning cash.  Median EBITDA and cash flow was -$14mm and $19mm, respectively.  

 

-Median and average revenue of the data set is $277mm and $567mm.  The average is pulled up by monsters like Salesforce, ServiceNow, Workday, and AthenaHealth.  Year over year revenue growth for the data set is 31%.  

 

 -Equity continues to be the dominant source of financing.  Median debt on the balance sheet is only $1mm.  The market value of equity on the other hand is $1.9bln on median. 

 

So what’s this data mean for a fast growing private SaaS business? Public multiples and trends tend to guide what’s happening in the private markets: i) investors will look to invest in your private SaaS business somewhere between 4x and 6x unless your growth rate is demonstrably higher than 30% YOY; ii) financing will continue to come from equity, less so from debt, although we’ve seen banks like Bridge Bank get more aggressive and lenders like Lighter Capital get more creative; iii) and burning cash is still acceptable, within reason. 

 

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