Morning Report: How have this year’s software IPOs performed so far? Let’s take a quick peek.
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It’s been a better year for tech IPOs than the last few, meaning that more companies have gone public—even some unicorns have deigned to go public. The markets are hot, and companies are taking advantage of the welcoming climate.
Today I want to take a quick look back at a few of this year’s technology IPOs to see how the group is doing. I also want to calculate a few ARR multiples to get a temperature for the sector.
The following companies are the bulk of 2018 SaaS IPOs. They are presented in no particular order. When reading, compare their share price gains or losses to their current revenue multiples.
Worth $27 per share, went public at $21 per share, currently trades at an ARR multiple 8.3 and a trailing revenue multiple of 8.97 (per Yahoo Finance).
Worth $29.05 per share, went public at $15 per share, currently trades at an ARR multiple of 22.8 and a trailing revenue multiple of 23.3 (per Yahoo Finance).
Worth $32.51 per share, went public at $15 per share, currently trades at an ARR multiple of 20.5 and a trailing revenue multiple of 22.64 (per Yahoo Finance).
Worth $26.78 per share, went public at $15 per share, currently trades at an ARR multiple of 19.11 and a trailing revenue multiple of 12.66 (per Yahoo Finance).
That was a lot. What should you take away? A few things:
- SaaS companies that went public this year have enjoyed steep share price appreciation. Domo is the exception to the rule, as we’d expect. I did not anticipate so many doubles, however.
- That share price appreciation is stretching valuations. Many companies listed above are trading far above the already-inflated currently-normal ARR multiples that the broader public SaaS market is worth.
- You can see the impact of non-recurring revenue in some entries. Pivotal and Zuora, for example, have more non-recurring revenue than their listed peers. This lowers their trailing revenue multiples while making their ARR-derived metrics look slightly silly. Do your homework before you think you understand the cohort, in other words.
But what we can safely say is that public-market investors are fawning over recent SaaS IPOs.
Illustration Credit: Li Anne Dias
For companies that break out subscription revenue, we use that line times four for ARR; in companies that don’t we use the full revenue sum.↩
Docusign has yet to release its second-quarter earnings, so the underlying revenue data here is dated.↩
Domo has yet to report earnings since going public, so we used the most-recent quarter from its S-1 to calculate its ARR.↩
The company has yet to report second-quarter earnings, so we used first-quarter revenue figures.↩