Quarterly insights: Software as a Service
SaaS outperforms in volatile quarter; many big winners and losers

Our SaaS universe’s average 1.6% stock price decline in the September quarter belies the market turmoil in our current 98-stock universe, as seven stocks gained over 30% and 10 stocks lost over 30%.
The universe’s average enterprise value multiple of 2022 estimated revenue declined to 6.9 from 7.5 last quarter. The reduction reflects a combination of stock price declines and generally increasing 2022 revenue estimates, as the average 2022 estimated revenue growth rate increased to 30.0% from 28.8% last quarter.
While the correlations between the universe’s estimated revenue growth and revenue multiples improved from the very low levels last quarter, we still view the correlations as abnormally low. An eventual reversion to more normal levels will likely be one of the key drivers of future SaaS stock price moves.
TABLE OF CONTENTS
- Flattish Q3 SaaS performance belies market turmoil
- Larger SaaS stocks that previously held up better were hit more in Q3
- Growth impact on valuation
- Nearly a third of 2023 multiples below 3.0
- Q3 SaaS M&A: Notable transactions include acquisitions of Billtrust and Reposify
- Q3 SaaS private placements: Notable transactions include Klaviyo, HiBob and Upland Software
Flattish Q3 SaaS performance belies market turmoil
Our SaaS universe stocks dropped 1.6% on average in the September quarter, better than the 5.3% drop for the S&P 500. The average masks the market turmoil in our 98-stock universe, as seven stocks gained over 30% and 10 stocks lost over 30%. Our average SaaS enterprise valuation multiple of 2022 estimated revenue dropped to 6.9 from 7.5 last quarter, and for 2023 estimated revenue, it dropped to 5.5 from 5.9 last quarter.
Our SaaS subgroups also performed disparately, with the enterprise productivity group gaining 4.0% on average in the September quarter after big declines last quarter and the healthcare group declining 17.9% on average after being the best performer last quarter. We believe the bear market hit some companies and sectors earlier than others. Weave Communications (WEAV) bounced 66.1% off its depressed level last quarter, and ChannelAdvisor (ECOM) gained 55.4% on a takeover offer. On the downside, Agora (API) dropped 44.7% as China concerns continued, and 2U (TWOU) dropped 40.3%.

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