Software Index
State of the Market
The Scalar Software Index's NTM revenue multiple is up 4.8% month-over-month. The NASDAQ outperformed the S&P 500 in July. Large-cap tech stocks, including Alphabet, Amazon, Meta, and Apple, have all reported better-than-expected earnings for Q2. The Federal Reserve increased the target Fed Funds Rate by another quarter point during its July meeting. Inflation continues to be persistent but shows signs of slowing down, and economists and investors are split as to whether or not the Federal Reserve will increase interest rates by one more quarter-point before the end of the year. We're seeing an increase in recapitalizations among late-stage private companies that raised large equity rounds of financing in 2021. Other private technology companies that don't have meaningful revenue growth and continue to burn cash are facing the prospect of selling their companies for valuations that don't exceed their liquidation preferences. Since December of 2021, there hasn't been a major tech company IPO, but Softbank-backed Arm Ltd, a chip designer, announced plans to IPO in September at a valuation between $60B and $70B. If the NASDAQ proves resilient, we expect other tech IPOs to follow in the not-too-distant future.
Median
NTM Rev Multiple
6.1x
Median
NTM Rev Growth
14.5%
Median
Gross Margin
75.0%
Top 10*
NTM Rev Multiple
15.8x
Top 10*
NTM Rev Growth
18.3%
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%)
10.9x
Multiple | Growth |
|---|
EV/NTM Revenue Multiple
Average Growth (15%-30%)
7.9x
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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