SEG’s 2Q20 SaaS Public Market Update highlighted top SaaS companies by median EV/Revenue, many of which are reaping the benefits from mandatory work from home orders due to COVID-19. In fact, 70% of the top ten companies by EV/TTM Revenue in 2Q20 are work from home companies.
The three major product categories with increased demand due to COVID-19 work from home measures include Communications and Collaboration, Development Operations & IT Management, and Security. These software providers help individuals and businesses connect from various remote locations, ensure the back-end operations are functioning and operable from remote locations, and the security requirements are met for remote access to businesses.
SEG SaaS Index Top 10 Companies
The top ten companies in the SEG SaaS Index posted a median 27.5x EV/Revenue multiple (1). This represents a 212% increase over the Index median of 8.8x EV/Revenue in 2Q20. The group’s median market capitalization was $19.5 billion, compared to the Index median market cap of $4.4 billion.
SEG SaaS Index: Top 10 by EV/Revenue – 2Q20
Of the top ten companies, 30% were Security providers, 20% are Communications & Collaboration, and 20% are Development Operations & IT Management. These work from home companies posted median multiple of 27.3x in 2Q20, and saw the median multiple expand 34.3% from 4Q19’s median 20.3x. Comparatively, the EV/Revenue multiple for the SEG SaaS Index expanded 11% in 2Q20 (8.8x in 2Q20 vs. 7.9x in 4Q19).
A Shift in Demand
Mandatory work from home requirements from the COVID-19 outbreak caused a clear shift in demand for software providers. Investors are placing greater value on companies providing critical offerings to businesses that need to support operations and employees in remote locations. It will be interesting to see the how demand impacts the top ten companies in the second half of 2020.
Read SEG’s 2Q20 SaaS Public Market Update for more coverage on the 90+ companies in the SEG SaaS Index.
(1) Median EV/Revenue is calculated by taking the median enterprise value over the quarter, divided by the last disclosed TTM Revenue.