Silverpeak Benchmark Report Q1 2021 - A review of key company valuation metrics in the UK, European and US Application Software sectors
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technology investment banking Silverpeak Benchmark Report Q1 2021 A review of key company valuation metrics in the UK, European and US Application Software sectors Paddy MccGwire Alex Lawton-Smith t: +44 (0) 20 7659 0310 t: +44 (0) 20 7491 1271 e: pm@silverpeakib.com e: als@silverpeakib.com silverpeakib.com London | Paris | Milan | San Francisco | Shanghai © Silverpeak LLP 2021 Silverpeak LLP is authorised and regulated by the Financial Conduct Authority
Contents 01 // SILVERPEAK OVERVIEW 02 // REPORT HIGHLIGHTS 03 // SOFTWARE VALUATION METRICS 04 // COMPANY CATEGORISATION © Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai
01 // A COMPANY SNAPSHOT
Silverpeak advises outstanding growth technology
companies on M&A and larger financing transactions
European clients – Global counterparties
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai
01 // SELECTED RECENT TRANSACTIONS
Denotes Silverpeak transaction
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai
02 // REPORT HIGHLIGHTS
Key Takeaways
Valuation multiples in the US struggled whilst European and UK multiples largely continued to recover
01 02 03 04
Both revenue and EBITDA Revenue multiples for US Vertical, EBITDA multiples fell significantly In the Enterprise Value Index, all
valuation multiples fell for nearly Horizontal and SaaS application in the middle of Q1 for US sub sectors increased or remained
all US software categories in Q1 software companies have all fallen companies. US Horizontal constant from Q4’20.
2021, stalling the strong recovery in Q1 but remain at or above pre- recovered by the end of March for However, towards the end of the
and advance shown in the second pandemic highs. a median multiple of 40x, now quarter four of the five verticals
half of 2020. well above SaaS and Vertical showed a downward move, with
In contrast, median revenue multiples of 29x and 26x. FinTech as the only exception.
In Europe and the UK, valuation multiples for UK Small & Mid and EBITDA margins remained stable
metrics continue to increase, the European software companies across most categories, whereas HR Tech continues to outperform
exception being European EBITDA have continued to increase and forecast annual revenue growth other sub sectors, although it
multiples which have fallen 18%. are now both above pre-COVID increased significantly for all. showed the largest fall of any
levels for the first time. vertical from February to March.
Source: Capital IQ, Silverpeak
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai
03 // SOFTWARE VALUATION METRICS
Report Summary
MEDIAN REVENUE MULTIPLES(1)
CATEGORY Q4 2020 Q1 2021 COMMENTARY
• US SaaS revenue multiples fell by the most of any category, down 11% Q.o.Q.
US SaaS 11.1x -11.0%
9.9x • Median EBITDA multiples also decreased by 12% to 29x in Q1
• This is despite increased forecast revenue growth and stable median EBITDA margins
• Revenue multiples fell by 7%, following a strong post-COVID recovery in 2020
US Vertical 8.4x -6.9%
7.8x • EBITDA multiples fell 15% Q.o.Q. to 26x and remain the lowest of the US software categories
• EBITDA margin was unchanged from Q4 and forecast revenue growth rose from 6% to 10%
• US Horizontal revenue multiples continue to largely mirror US Vertical, falling by 4%
US Horizontal 8.1x -4.4%
7.7x • EBITDA multiples recovered strongly from a dip early in Q1, finishing at 40x – up 12% Q.o.Q.
• Forecast revenue growth has increased to 14%, and EBITDA margins fell from 22% to 20%
• Revenue multiples continue to increase, now up to 4x and above pre-COVID levels
UK Small & Mid 3.6x +16.1%
4.1x • EBITDA multiples had a 18% uplift to 27x, whereas multiples fell in most other categories
• Annual forecast revenue growth doubled to 6%, but remains well below the US and Europe
• European revenue multiples reached new highs in Q1, increasing to 4x with 17% growth Q.o.Q.
Europe 3.5x +17.4%
4.1x • EBITDA multiples fell to 20x, but remain just above the 24-month average of 19x
• Revenue growth also almost doubled, rising from 6% to 11% - largest increase of all categories
(1)
Source: Capital IQ, Silverpeak Note: Q1 2021 multiples are taken at 31/03/21, LTM
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai03 // SOFTWARE VALUATION METRICS
Median revenue multiples fall in Q1 for US application software companies
Application software sector valuation metrics: median Revenue multiples 2016-2021 Q1
Q1
13x
MEDIAN REVENUE
MULTIPLES Q1 2021
11x
US SAAS
9x 9.9x
US VERTICAL
7.8x
7x
US HORIZONTAL
7.7x
5x
UK SMALL & MID
4.1x
3x
EUROPE
4.1x
1x
2016 2017 2018 2019 2020 2021
Source: Capital IQ, Silverpeak Note: Q1 2021 multiples are taken at 31/03/21, LTM
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai03 // SOFTWARE VALUATION METRICS
Median EBITDA multiples for US SaaS & Vertical fall significantly in Q1
Application software sector valuation metrics: median EBITDA multiples 2016-2021 Q1
Q1
50x
MEDIAN EBITDA
45x
MULTIPLES Q1 2021
40x
US HORIZONTAL
40.2x
35x
US SAAS
28.8x
30x
UK SMALL & MID
25x 27.4x
US VERTICAL
20x
25.7x
15x EUROPE
20.1x
10x
2016 2017 2018 2019 2020 2021
Source: Capital IQ, Silverpeak Note: Q1 2021 multiples are taken at 31/03/21, LTM
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai03 // SOFTWARE VALUATION METRICS
Enterprise values on downward trend towards the end of Q1’21
Median monthly Enterprise Value index, by sub sector, 2019-2021 Q1
Q1 21
550
520
CHANGE IN INDEX EV VALUE
Enterprise values fell across all sub sectors
490 JAN’21 – MAR’21
from February to March in Q1’21,
460
except for FinTech.
430
HR Tech continues to outperform other HR TECH
HR TECH
400
verticals which finished the quarter with +64
+116
370
negligible change to median EVs
340 CLOUD TECH
310 +4
280
CYBERSECURITY
250
-1
220
190 INDUSTRIAL
160 +1
130
100 FINTECH
70
+19
40
Data rebased Mar-19
Dec-18 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
at Jan-19
Source: Capital IQ, Pitchbook, Silverpeak Methodology: Data points are a median of daily median EV values over a month.
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai03 // SOFTWARE VALUATION METRICS
Quarterly change in operating metrics
MEDIAN REVENUE MEDIAN EBITDA
MULTIPLE MARGIN
12x 30%
11x
10x Application software median revenue
25%
9x multiples have fallen in the US
8x but increased in Europe in Q1
7x 20%
6x
There has been a significant uplift in
5x
15% median annual forecast revenue
4x
growth across all groups in Q1
3x
2x 10%
0% 5% 10% 15% 20% 0% 5% 10% 15% 20%
MEDIAN FORECAST ANNUAL REVENUE GROWTH MEDIAN FORECAST ANNUAL REVENUE GROWTH
US SaaS US Vertical US Horizontal UK Small + Mid Europe
Q1 2021
Q4 2020
Source: Capital IQ, Silverpeak Note: Q1 2021 multiples are taken at 31/03/21, LTM
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai04 // COMPANY CATEGORISATION
Company Categorisation – By Type
For comparison purposes, we’ve grouped companies covered in the report into one of five categories
US Vertical UK Small & Mid*
US publicly quoted application software companies Small and medium sized (by market
with a strong focus on one (or a small number of) capitalisation) UK publicly quoted
vertical market(s) e.g. healthcare, financial services etc. application software companies
02 04
US VERTICAL UK SMALL & MID
01 03 05
US SAAS US HORIZONTAL EUROPE
US SaaS US Horizontal Europe*
US publicly quoted application US publicly quoted application European publicly
software companies operating software companies selling quoted application
a pure Software as a Service solutions across a software companies
model wide range of verticals
*We've grouped UK and Europe companies in this manner because sample sizes do not permit a breakdown into horizontal vs vertical vs SaaS focused companies
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | Shanghai04 // COMPANY CATEGORISATION
Company Categorisation – By Sub Sector
The data set was further categorised by the most common sub sectors
Cybersecurity HR Tech
Information technology companies Companies developing software
that provide a solution specifically designed to improve human
oriented towards providing user and resource management
network security. operations and hiring processes.
B D
CYBERSECURITY HR TECH
A C E
CLOUD TECH FINTECH INDUSTRIAL
Cloud Tech FinTech Industrial
Includes companies that help Companies using new technologies Providing software to companies
organisations develop, (e.g. internet, blockchain, engaged in providing industrial and
operationalise and monitor algorithms…) to offer or facilitate commercial supplies and services,
software and applications at scale. financial services usually offered by diversified trading, distribution
traditional banks. operations, and transportation
services.
Source: Capital IQ, Pitchbook, Silverpeak
© Silverpeak LLP 2021 London | Paris | Milan | San Francisco | ShanghaiDisclaimer This presentation has been prepared exclusively for internal use and does not carry any right of publication or disclosure to any other party. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of Silverpeak LLP, trading as ‘Silverpeak technology investment banking’ (“Silverpeak”). The information in this presentation reflects prevailing conditions and our views as of this date, all of which are subject to change. In preparing this presentation, Silverpeak has relied upon and assumed, without independent verification, the accuracy and completeness of all information available to us or from public sources or which was otherwise reviewed by us. This presentation has been produced by Silverpeak LLP based on the information gathered and provided by the Company. Silverpeak LLP is authorised and regulated by the Financial Conduct Authority silverpeakib.com London | Paris | Milan | San Francisco | Shanghai © Silverpeak LLP 2021 Silverpeak LLP is authorised and regulated by the Financial Conduct Authority
Thank you from Silverpeak
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