Q3 SaaS metrics and financials

We keep close track of every SaaS IPO in the past five years (since MongoDB in October 2017). Those 64 companies have all now issued their Q3 2022 earnings. Below we summarize key financials and metrics.

Median quarterly revenue of $118mm. Median and average revenue of the 64 companies was $118mm and $189mm respectively. Annualized, that’s $472mm and $756mm 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. Q2 and Q1 medians were $103mm and $102mm respectively.

YOY growth of 29%. Median and average YOY growth was 29% and 29% respectively. Given the size of these SaaS businesses, that is fantastic growth. However, note that growth is slowing: Q2 and Q1 medians were 30% and 36% respectively, so growth is slowing.

1 in 5 generate an operating profit. Only 23% of the companies generate an operating profit. The median operating loss is -$23mm and average is -$37mm. Those are margins of -26% and -30% respectively. Q2 and Q1 medians were -32% and -30% respectively.

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 $0.77 of new revenue for every dollar of loss. That means so long as net dollar retention is over 100%, the payback on median is 1.3 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 We do not quote the average because it is subject to skew.

Revenue to loss ratio. The median revenue to loss ratio is 2.90x. In other words, for every dollar of loss, the companies have $2.90 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 64 SaaS companies we follow, only 53% of them (34 companies) report their net dollar retention in their quarterly filing. Nearly none report gross dollar retention.

Median NDR of 123%. Median net dollar retention for those companies reporting is 123% and the average is 121%. 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. Q2 and Q1 medians were 125% and 120% respectively.

Comparison to historical data. Below we compare Q3’s median to historical medians we have collected. Note the drop in growth.

Sammy is the Managing Partner and Co-Founder of Blossom Street Ventures. Visit us at blossomstreetventures.com and email directly at sammy@blossomstreetventures.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.