Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.
This quarter, we’ve also created a COVID-19 index, analysing its impact on the Enterprise Value of various sub-sectors within our data set.
The unprecedented COVID-19 pandemic has resulted in a U-turn of last quarter’s growing revenue multiples, which has also amplified the decline of EBITDA multiples across all categories. Europe, UK Small & Mid and US Vertical revenue multiples have all sunk to pre-2015 levels.
US Horizontal revenue multiples have fallen dramatically since their immense growth of 22% last quarter. But, for the first time since mid-2017, US Horizontal EBITDA multiples are now higher than US SaaS multiples, despite having a 3% lower median EBITDA margin.
US SaaS revenue multiples have crashed by 28%, to a similar level to Q2 2017, despite only a 1% decline in forecast revenue. In practice, most revenue guidance has been suspended. The multiples fall was amplified for EBITDA multiples, where they now lie at 23.7x, plummeting 40% since last quarter.
Proportionate falls in revenue multiples have been greatest in the US. However, reduction in forecast growth is greatest for UK Small & Mid and Europe, both reducing by 1/3 to c.10%.