PUBLIC MARKETSEG Snapshot: 2Q22 SaaS Public Market UpdatePublicly-traded SaaS companies posted a median 7.1x EV/Revenue multiple, down 53% YOY from 2Q21’s 15.2x peak level of irrational exuberance in public equities. Yet, compared to the pre-pandemic average, public SaaS valuations are down a more modest 16%.
Download the SEG Snapshot: 2Q22 SaaS Public Market Update
SEG’s 2Q22 SaaS Public Market Update is a snapshot of how public companies are performing in our SEG SaaS Index. The Index is comprised of 110 publicly traded companies that primarily offer solutions via the cloud and may have a subscription or transaction-based pricing model.
- Companies in the SEG SaaS Index continued to post strong revenue growth in Q2. However, investors shifted focus away from riskier, high-growth high-burn assets and toward forward-looking risk factors such as macroeconomic uncertainty, rising interest rates, and rampant inflation. This shift in sentiment caused public SaaS revenue multiples to decline 53% YOY to 7.1x EV/Revenue.
- While multiples are down 53% YOY, it is important to note that 2Q21’s 15.2x EV/Revenue multiple was a record high (perhaps unsustainable) climax for multiples driven by increased demand for SaaS applications and changes to how we work brought on by the pandemic. For context, Q2’s 7.1x EV/Revenue multiple is down a more modest 16% from the pre-pandemic period of 1Q19 to 1Q20 (8.5x), which was considered a very strong period.
- Public SaaS companies with profitability experienced the smallest YOY decline in EV/Revenue multiples across all cohorts we track, and those with a gross margin of 80% or higher saw a median multiple 52% higher than the Index median.
- Product categories leading digital transformation initiatives and the changing workplace, such as Communications & Collaboration and Dev Ops & IT Management, had the highest revenue growth rates in Q2 but still saw their multiples drop dramatically.
- Companies providing mission-critical solutions such as ERP & Supply Chain and Security were the most resilient, experiencing a modest YOY decline in multiples relative to the broader SEG SaaS Index and other product categories, ending 2Q22 with the highest multiples across all product categories.