SEG Snapshot: 2Q20 SaaS Public Market Update

SEG’s 2Q20 SaaS Public Market Update is a snapshot of how public companies are performing in our SEG SaaS Index. The Index is comprised of 91 publicly traded companies that primarily offer solutions via the cloud and / or through a subscription or transaction-based model.

The SEG SaaS Index made a stellar rebound in 2Q20, capping off the quarter at an all time high in terms of YTD stock price performance. Public SaaS companies outpaced other indices, including Nasdaq, Dow Jones, and S&P 500 (see our June 2020 SaaS Index Update for more on stock price performance).

On a quarterly basis, the median revenue multiple was in line with prior quarters, posting 8.8x EV/Revenue in 2Q20. The solid multiple points to the health and resiliency of public SaaS companies during the COVID pandemic and associated macro uncertainty.

Evaluating the median EV/Revenue multiple on a monthly basis further demonstrates the impressive rebound by public SaaS companies, surpassing pre-COVID levels and posting a striking 10.4x EV/Revenue multiple in June.

The size of public SaaS companies continues to grow, as the SEG SaaS Index posted a median TTM revenue of $545.8M. Revenue growth slowed YOY, posting a median 25.4% compared to 2Q19’s 27.4% revenue growth.

In this period of market uncertainty, there was a flight to safer, higher quality assets as evidenced in the higher YOY EV/Revenue multiples for companies greater than 20% on a Rule of 40% basis, and profitable businesses with EBITDA margins over 20%. 

Communications and Collaborations companies continue to reap the benefits of social distancing measures. The group posted a median 18.9x EV/Revenue and includes SaaS high-fliers Zoom (55.3x), RingCentral (23.8x), Slack (23.7x), and Docusign (21.1x).

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