Software Index
State of the Market
Public software company multiples continue to slowly inch upward. The NASDAQ is up ~30% year to date, and the Scalar Software Index's next-twelve-month median multiple is up 2% month over month. The debt ceiling bill was passed by the Senate and signed into law by the President. Inflation continues to decline but remains persistent. The Federal Reserve paused on increasing the Fed Funds Rate in June but is likely to raise the target rate with two more quarter-point hikes before the end of the year. ADP payroll numbers came in above expectations with 497,000 private-sector jobs added. Venture funds continue to invest in early-stage companies, but at a slower pace than in 2022. Growth-equity investments continue to be anemic, but a flurry of down rounds and M&A transactions in late-stage companies are likely to occur in the fall as those companies' cash dwindles to levels that may jeopardize their solvency. We expect public software company multiples to continue to ebb and flow within their current trading range.
Median
NTM Rev Multiple
5.8x
Median
NTM Rev Growth
14.5%
Median
Gross Margin
74.5%
Top 10*
NTM Rev Multiple
13.9x
Top 10*
NTM Rev Growth
22.6%
Top 10*
Gross Margin
74.5%
*Median multiple, growth rate, and gross margin for the top 10 companies based on EV/NTM Revenue.
Valuation Trends
Index Leaders
Top 10 companies in the Software Index based on current EV / NTM Revenue Multiple.
Multiples by Growth Tranche
Valuation multiples are strongly correlated to expected growth. Scalar has selected the tranches based on current market conditions.
EV/NTM Revenue Multiple
High Growth (> 30%)
10.0x
Multiple | Growth |
|---|
EV/NTM Revenue Multiple
Average Growth (15%-30%)
7.5x
Multiple | Growth |
|---|
EV/NTM Revenue Multiple
Low Growth (< 15%)
3.8x
Multiple | Growth |
|---|
EV/NTM Revenue Multiple - Top Quartile
NTM Revenue Multiple and NTM Growth Rate for the top quartile of companies in the Scalar Software Index, ordered by NTM Growth Rate.
Pre- & Post- Money Deals
Averages for the trailing 6 months of successful software and SAAS fundraising, including rounds Series A through Series D.
Average
Deal Size
Average
Pre-Money Valuation
Average
Post-Money Valuation
The data for the Scalar Software Index is collected based on market data on the last trading day of the previous month.
Metric definitions:
- EV/NTM Rev: Enterprise value to next twelve months revenue.
- EV $MM: Enterprise value, calculated as the market value of equity plus net debt and minority interest, in millions of USD.
- LTM Rev $MM: The last twelve months revenue in millions of USD.
- NTM Rev Growth: The expected growth rate of revenue for the next twelve months.
- LTM Rev Growth: The growth rate of revenue over the last twelve months.
- Gross Margin: The percentage calculated from gross profit over revenue.
- Operating Margin: The percentage calculated from operating income (EBIT) over revenue.
- FCF Margin: The percentage calculated from unlevered free cash flow over revenue.
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Data Sources: S&P Global Market Intelligence and PitchBook Data, Inc.
Enterprise Software Operating Metrics provided by Public Comps.
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