SEG’s 1Q20 SaaS Public Market Update is a snapshot of how public companies are performing in our SEG SaaS Index. The Index is comprised of 100 publicly traded companies that primarily offer solutions via the cloud and / or through a subscription or transaction-based model.

Public stock markets took a major turn from the decade-long bull market due to uncertainty from COVID-19. Major indices such as Nasdaq, S&P 500, and Dow Jones took the plunge during March, and we continue to measure the impact on public SaaS companies.

The COVID-19 downturn is expected to impact valuations in the SaaS public market. On a quarterly basis, the median revenue multiple in 1Q20 remained in line with prior quarters, reaching 8.4x EV/Revenue.

An analysis of revenue multiples on a monthly basis shows the impact of the COVID-19 downturn. The median revenue multiple in March dipped to 6.1x EV/Revenue, and then increased to 6.5x EV/Revenue in April. We expect to see the impact on valuation to be reflected in the second quarter.

Communications & Collaboration SaaS companies continue to outpace other product categories in terms of valuation and is expected to continue this trend due to increased demand with mandatory stay at home orders. Select companies in the top 25% of the Index (by EV/Revenue) include Zoom, RingCentral, and Slack.

SaaS companies continue to grow at a healthy rate alongside a modest increase in revenue, as the Index surpassed $500M TTM revenue in 1Q20. In addition, EBITDA margins improved significantly, reaching a median -0.6% in 1Q20, compared to last quarter’s -2.3% margin.

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