Travel marketplaces are still strong at 4.7x. Multiples hit 10.6x in Q2 2021 which is remarkable for a business that traditionally trades no greater than ~3x. Booking.com is trading at an especially strong 9.9x and is the only company to maintain its profitability over the last 12 months ($997mm).
Labor intensive space. The only reason we even include these companies in our analysis is because investors like Softbank insist on labelling these services businesses as tech co’s. At best, they’re tech enabled which isn’t the same thing at all. Remember when Groupon was a high flier? Well today it’s shrinking (-46% YOY growth) and trades at 0.6x revenue. Cash on the books represents more than half the market cap. This was one of the fastest growing companies ever that came up during the recession of ’08, and now no one cares. Redfin and Opendoor feel especially overvalued. OpenDoor, Redfin, and Compass don’t make money, which is a very dangerous place to be for services businesses of their size.
Rideshare multiples coming in. Lyft is at 4.3x revenue while Uber is at 5.1x revenue. We suspect the revenue multiple for both would be higher, but both businesses light cash on fire. Lyft’s EBITDA margin is -40% and Uber’s is -18%. It’s hard to envision either company generating cash any time in the near future given their current market share and very high levels of burn, and keep in mind food delivery saved Uber during 2020. Bird is trading at 11x even though their business model is broken.
Gaming. The median revenue multiple of 4.7x is strong. SciPlay is an underperformer at 0.1x while Roblox is at a very high 39x while being the only cash burner in the group. In 2021 Roblox just got hit with a $200mm lawsuit over music rights (June 2021).
Hardware is elevated at 3.3x. Roku is the standout of the group (11x) as it’s growing at a strong 106% YOY. Peloton trades at 3.3x on 183% YOY growth thanks to covid. Apple’s growth is 37%, very strong for a company with $365bln in annual sales and a 33% margin. They recently had a $3trln market cap.
SaaS
The gap between the average and median is 5.7x, meaning premium SaaS companies are getting outlier valuations. 54% of companies are trading at 10x revenue or greater. The data is below.
The trend is still on. The chart in the picture 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 8.4x.
Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 68 companies trade at greater than 10x revenue, 50 trade at greater than 15x, and 37 trade at greater than 20x.
SaaS businesses are healthy. There is almost no debt on these businesses (except McAfee) as banks don’t like ‘asset-lite’ businesses like software. Additionally, these companies have $402mm of cash on the balance sheet on median, plenty relative to annual burn (recall EBITDA is -$16mm). The number of years of cash on the balance sheet is less important given that these businesses are generally cash flow positive (median of $42mm); only 35 out of the 126 companies have negative cash flow. Note that 69 out of the 126 have negative EBITDA, but again that’s acceptable so long as the growth is present and cash flow overall is positive.
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