Software Index
State of the Market
The Consumer Price Index (CPI) increased by 3.5% in March. Total nonfarm payroll employment rose by 303,000 in March, leaving unemployment relatively flat at 3.8%. These results mark the third consecutive month that inflation and employment data have exceeded expectations, indicating a resilient US economy which has absorbed 11 Federal Funds rate hikes since March of 2022. Reflecting these positive indicators, Kipp DeVeer, Head of Credit at Ares, stated on CNBC that there’s “pretty good economic growth” and that “you see companies and consumers adapting to higher rates” and “it doesn’t seem to be too disruptive”.
Notwithstanding, markets have become accustomed to the zero-interest-rate policy (“ZIRP”) and were expecting a soft landing. With inflation being stickier than anticipated, the market consensus is now targeting up to three Federal Funds rate cuts this year versus the six previously anticipated. Federal Reserve Chair Jerome Powell recently stated that “the recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence”. Further, former Secretary of the Treasury Larry Summers continues to be hawkish and recently stated “you have to take seriously the possibility that the next rate move will be upwards rather than downwards”.
What does all this mean? The Federal Funds rate is the interest rate set by the Federal Reserve at which commercial banks borrow and lend to each other. The Federal Funds rate drives the cost of capital and impacts the valuation of all assets, especially high-growth technology companies. If Secretary Summers is correct, then we would expect multiples to contract. In fact, we’re already seeing this in the data as of April 1, 2024; the Scalar Software Index Top 10 Next Twelve Month multiple decreased by 8.4% month-over-month to 15.0X, and the Scalar Software Index Median Next Twelve Month multiple decreased by 1.5% to 6.0X.
In light of the Federal Funds rate uncertainty and the resilience of the US economy, technology companies should continue to employ cost-cutting measures on non-essential expenditures and focus on driving efficiencies through artificial intelligence and sales to drive revenue growth. The best-in-class software companies demonstrate revenue growth even when besieged by uncertainty.
Median
NTM Rev Multiple
6.0x
Top 10*
NTM Rev Multiple
15.0x
Median
NTM Rev Growth
11%
Top 10*
NTM Rev Growth
21%
Median
Gross Margin
75%
Top 10*
Gross Margin
76%
*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.
|
Company
|
EV/NTM Rev
|
EV ($MM)
|
LTM Rev $MM
|
NTM Rev Growth
|
LTM Rev Growth
|
Gross Margin
|
Operating Margin
|
FCF Margin
|
|---|---|---|---|---|---|---|---|---|
| Cloudflare, Inc. | 19.6x | 32,457 | 1,297 | 27.7% | 33% | 76% | -14% | 24% |
| CrowdStrike Holdings, Inc. | 18.8x | 74,892 | 3,056 | 30.1% | 36% | 75% | 0% | 33% |
| Palantir Technologies Inc. | 17.8x | 47,556 | 2,225 | 20.4% | 17% | 81% | 5% | 30% |
| Samsara Inc. | 16.8x | 20,080 | 937 | 27.5% | 44% | 74% | -27% | 19% |
| Datadog, Inc. | 15.2x | 39,339 | 2,128 | 21.5% | 27% | 81% | -2% | 28% |
| Manhattan Associates, Inc. | 14.8x | 15,159 | 929 | 10.1% | 21% | 54% | 23% | 25% |
| Snowflake Inc. | 14.4x | 49,504 | 2,806 | 22.3% | 36% | 68% | -39% | 39% |
| ServiceNow, Inc. | 13.8x | 150,496 | 8,971 | 21.5% | 24% | 79% | 8% | 36% |
| MongoDB, Inc. | 13.1x | 25,332 | 1,683 | 15.3% | 31% | 75% | -14% | 14% |
| HubSpot, Inc. | 12.2x | 31,150 | 2,170 | 18.1% | 25% | 84% | -5% | 18% |
| Microsoft Corporation | 12.1x | 3,156,509 | 227,583 | 14.4% | 12% | 70% | 45% | 26% |
| The Descartes Systems Group Inc. | 11.9x | 7,484 | 573 | 10.3% | 18% | 76% | 29% | 35% |
| Zscaler, Inc. | 11.7x | 27,646 | 1,896 | 25.0% | 41% | 78% | -10% | 32% |
| GitLab Inc. | 11.2x | 8,260 | 580 | 26.7% | 37% | 90% | -31% | 68% |
| Shopify Inc. | 11.2x | 95,485 | 7,060 | 20.8% | 26% | 50% | 4% | 8% |
| Atlassian Corporation | 11.0x | 50,246 | 3,892 | 17.9% | 22% | 82% | -5% | 31% |
| monday.com Ltd. | 10.7x | 9,995 | 730 | 28.3% | 41% | 89% | -5% | 24% |
| SPS Commerce, Inc. | 10.6x | 6,575 | 537 | 15.3% | 19% | 66% | 14% | 21% |
| Adobe Inc. | 10.1x | 223,327 | 19,936 | 10.5% | 11% | 88% | 35% | 34% |
| JFrog Ltd. | 9.8x | 4,178 | 350 | 22.0% | 25% | 78% | -19% | 30% |
| Qualys, Inc. | 9.4x | 5,717 | 554 | 9.6% | 13% | 81% | 29% | 37% |
| Confluent, Inc. | 9.2x | 8,754 | 777 | 22.3% | 33% | 71% | -54% | 14% |
| Clearwater Analytics Holdings, Inc. | 8.5x | 3,688 | 368 | 18.0% | 21% | 71% | 0% | 29% |
| DoubleVerify Holdings, Inc. | 8.3x | 5,798 | 573 | 21.7% | 27% | 81% | 15% | 18% |
| Dynatrace, Inc. | 8.1x | 13,038 | 1,364 | 18.3% | 24% | 83% | 9% | 24% |
| Workday, Inc. | 8.0x | 67,489 | 7,259 | 15.8% | 17% | 76% | 3% | 29% |
| Sprout Social, Inc. | 7.8x | 3,335 | 334 | 27.6% | 31% | 77% | -19% | 21% |
| SentinelOne, Inc. | 7.7x | 6,323 | 621 | 31.6% | 47% | 71% | -60% | 14% |
| Salesforce, Inc. | 7.7x | 291,513 | 34,857 | 9.1% | 11% | 76% | 17% | 33% |
| Oracle Corporation | 7.5x | 423,876 | 52,510 | 7.5% | 9% | 72% | 29% | 27% |
| C3.ai, Inc. | 7.4x | 2,587 | 296 | 18.3% | 11% | 59% | -104% | -17% |
| Braze, Inc. | 7.1x | 4,054 | 472 | 21.7% | 33% | 69% | -30% | 16% |
| Elastic N.V. | 6.8x | 9,686 | 1,212 | 17.1% | 18% | 74% | -10% | 24% |
| Klaviyo, Inc. | 6.7x | 5,969 | 698 | 27.9% | 48% | 75% | -46% | 34% |
| Okta, Inc. | 6.6x | 16,608 | 2,263 | 10.8% | 22% | 74% | -20% | 33% |
| Informatica Inc. | 6.6x | 11,223 | 1,595 | 6.4% | 6% | 80% | 6% | 28% |
| BlackLine, Inc. | 6.6x | 4,227 | 590 | 9.4% | 13% | 75% | -1% | 16% |
| Tenable Holdings, Inc. | 6.4x | 5,781 | 799 | 13.0% | 17% | 77% | -5% | 23% |
| Workiva Inc. | 6.4x | 4,621 | 630 | 14.4% | 17% | 76% | -11% | 19% |
| Docebo Inc. | 6.4x | 1,416 | 181 | 22.6% | 27% | 81% | 3% | 11% |
| HashiCorp, Inc. | 6.4x | 4,113 | 583 | 10.7% | 23% | 81% | -42% | 6% |
| Paylocity Holding Corporation | 6.4x | 9,373 | 1,292 | 13.9% | 29% | 69% | 17% | 20% |
| Dayforce Inc. | 6.4x | 10,973 | 1,514 | 14.0% | 21% | 47% | 9% | 8% |
| DigitalOcean Holdings, Inc. | 6.1x | 4,715 | 693 | 10.7% | 20% | 59% | 10% | 16% |
| Freshworks Inc. | 6.0x | 4,267 | 596 | 18.8% | 20% | 83% | -29% | 26% |
| Constellation Software Inc. | 6.0x | 60,312 | 8,407 | 20.3% | 27% | 35% | 14% | 32% |
| Paycom Software, Inc. | 5.9x | 11,037 | 1,694 | 10.5% | 23% | 87% | 27% | 19% |
| Couchbase, Inc. | 5.6x | 1,148 | 180 | 14.2% | 16% | 88% | -44% | 11% |
| PROS Holdings, Inc. | 5.6x | 1,854 | 304 | 10.0% | 10% | 62% | -17% | 11% |
| VTEX | 5.4x | 1,298 | 202 | 19.6% | 28% | 70% | -7% | 12% |
| ZoomInfo Technologies Inc. | 5.4x | 6,836 | 1,240 | 2.6% | 13% | 89% | 22% | 38% |
| AvidXchange Holdings, Inc. | 5.3x | 2,379 | 381 | 17.4% | 20% | 68% | -14% | 2% |
| BILL Holdings, Inc. | 5.0x | 6,584 | 1,192 | 9.9% | 39% | 86% | -16% | 11% |
| Appian Corporation | 5.0x | 3,051 | 545 | 12.9% | 17% | 74% | -19% | -2% |
| Paycor HCM, Inc. | 4.9x | 3,414 | 605 | 16.0% | 25% | 66% | -15% | 21% |
| Q2 Holdings, Inc. | 4.9x | 3,327 | 625 | 9.8% | 10% | 48% | -14% | 15% |
| Asana, Inc. | 4.5x | 3,241 | 653 | 10.7% | 19% | 90% | -41% | 12% |
| Five9, Inc. | 4.4x | 4,618 | 910 | 15.9% | 17% | 52% | -10% | 23% |
| Box, Inc. | 4.2x | 4,591 | 1,038 | 4.4% | 5% | 75% | 5% | 28% |
| PagerDuty, Inc. | 4.2x | 2,001 | 431 | 10.3% | 16% | 82% | -22% | 24% |
| Smartsheet Inc. | 4.2x | 4,691 | 958 | 16.5% | 25% | 81% | -13% | 29% |
| Jamf Holding Corp. | 4.0x | 2,477 | 561 | 10.1% | 17% | 80% | -19% | 24% |
| Progress Software Corporation | 4.0x | 2,918 | 715 | 2.5% | 15% | 86% | 18% | 30% |
| SolarWinds Corporation | 3.9x | 3,082 | 759 | 3.1% | 5% | 90% | 22% | 37% |
| DocuSign, Inc. | 3.9x | 11,329 | 2,762 | 5.9% | 10% | 80% | 2% | 40% |
| Pegasystems Inc. | 3.7x | 5,582 | 1,433 | 4.6% | 9% | 74% | 7% | 17% |
| Dropbox, Inc. | 3.6x | 9,033 | 2,502 | 1.8% | 8% | 81% | 15% | 30% |
| International Business Machines Corporation | 3.5x | 221,636 | 61,860 | 3.1% | 2% | 55% | 16% | 19% |
| Amplitude, Inc. | 3.4x | 996 | 276 | 6.1% | 16% | 74% | -34% | 18% |
| Sprinklr, Inc. | 3.4x | 2,723 | 732 | 9.9% | 18% | 76% | 5% | 9% |
| EverCommerce Inc. | 3.2x | 2,202 | 675 | 1.4% | 9% | 66% | 1% | 18% |
| Open Text Corporation | 3.1x | 18,250 | 5,696 | 2.3% | 61% | 77% | 15% | 7% |
| Enghouse Systems Limited | 3.0x | 1,074 | 350 | 3.6% | 11% | 67% | 18% | 26% |
| American Software, Inc. | 2.9x | 302 | 119 | -13.0% | 3% | 59% | 6% | 14% |
| Zoom Video Communications, Inc. | 2.9x | 13,216 | 4,527 | 2.0% | 3% | 76% | 13% | 33% |
| Zuora, Inc. | 2.7x | 1,220 | 432 | 5.2% | 9% | 67% | -14% | 7% |
| RingCentral, Inc. | 2.0x | 4,781 | 2,202 | 8.3% | 11% | 70% | -8% | 21% |
| Twilio Inc. | 1.9x | 8,298 | 4,154 | 5.2% | 9% | 49% | -9% | 15% |
| Veritone, Inc. | 1.9x | 256 | 128 | 6.5% | -15% | 78% | -61% | -26% |
| BigCommerce Holdings, Inc. | 1.8x | 608 | 309 | 7.1% | 11% | 76% | -18% | 2% |
| WalkMe Ltd. | 1.8x | 492 | 267 | 5.2% | 9% | 83% | -24% | 5% |
| Upland Software, Inc. | 1.7x | 451 | 298 | -8.4% | -6% | 68% | -11% | 26% |
| Yext, Inc. | 1.6x | 649 | 404 | -1.0% | 1% | 78% | -2% | 12% |
| Riskified Ltd. | 1.5x | 501 | 298 | 10.5% | 14% | 51% | -26% | 7% |
| Asure Software, Inc. | 1.4x | 179 | 119 | 3.9% | 24% | 72% | -3% | 7% |
| Rackspace Technology, Inc. | 1.3x | 3,574 | 2,957 | -7.1% | -5% | 22% | -2% | 21% |
| Domo, Inc. | 1.3x | 411 | 319 | 0.1% | 3% | 76% | -17% | 12% |
| eGain Corporation | 1.3x | 116 | 96 | -4.5% | -2% | 71% | 6% | 12% |
| Kaltura, Inc. | 1.0x | 173 | 175 | 0.0% | 4% | 64% | -22% | 11% |
| Expensify, Inc. | 1.0x | 139 | 151 | -6.5% | -11% | 56% | -22% | 8% |
| ON24, Inc. | 0.7x | 104 | 164 | -11.4% | -14% | 73% | -33% | 15% |
| Top 10 Average | 15.6x | 48,597 | 2,620 | 21.4% | 29% | 75% | -6% | 27% |
| Top 10 Median | 15.0x | 35,898 | 2,149 | 21.5% | 29% | 76% | -3% | 26% |
| Overall Average | 6.6x | 59,802 | 5,679 | 11.8% | 18% | 72% | -7% | 20% |
| Overall Median | 6.0x | 4,781 | 715 | 10.7% | 17% | 75% | -5% | 21% |
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 (> 25%)
11.2x
|
|
Multiple
|
Growth
|
|---|---|---|
| SentinelOne, Inc. | 7.7x | 31.6% |
| CrowdStrike Holdings, Inc. | 18.8x | 30.1% |
| monday.com Ltd. | 10.7x | 28.3% |
| Klaviyo, Inc. | 6.7x | 27.9% |
| Cloudflare, Inc. | 19.6x | 27.7% |
| Sprout Social, Inc. | 7.8x | 27.6% |
| Samsara Inc. | 16.8x | 27.5% |
| GitLab Inc. | 11.2x | 26.7% |
| Zscaler, Inc. | 11.7x | 25.0% |
EV/NTM Revenue Multiple
Average Growth (15%-25%)
8.2x
|
|
Multiple
|
Growth
|
|---|---|---|
| Docebo Inc. | 6.4x | 22.6% |
| Snowflake Inc. | 14.4x | 22.3% |
| Confluent, Inc. | 9.2x | 22.3% |
| JFrog Ltd. | 9.8x | 22.0% |
| Braze, Inc. | 7.1x | 21.7% |
| DoubleVerify Holdings, Inc. | 8.3x | 21.7% |
| ServiceNow, Inc. | 13.8x | 21.5% |
| Datadog, Inc. | 15.2x | 21.5% |
| Shopify Inc. | 11.2x | 20.8% |
| Palantir Technologies Inc. | 17.8x | 20.4% |
| Constellation Software Inc. | 6.0x | 20.3% |
| VTEX | 5.4x | 19.6% |
| Freshworks Inc. | 6.0x | 18.8% |
| Dynatrace, Inc. | 8.1x | 18.3% |
| C3.ai, Inc. | 7.4x | 18.3% |
| HubSpot, Inc. | 12.2x | 18.1% |
| Clearwater Analytics Holdings, Inc. | 8.5x | 18.0% |
| Atlassian Corporation | 11.0x | 17.9% |
| AvidXchange Holdings, Inc. | 5.3x | 17.4% |
| Elastic N.V. | 6.8x | 17.1% |
| Smartsheet Inc. | 4.2x | 16.5% |
| Paycor HCM, Inc. | 4.9x | 16.0% |
| Five9, Inc. | 4.4x | 15.9% |
| Workday, Inc. | 8.0x | 15.8% |
| MongoDB, Inc. | 13.1x | 15.3% |
| SPS Commerce, Inc. | 10.6x | 15.3% |
EV/NTM Revenue Multiple
Low Growth (< 15%)
4.0x
|
|
Multiple
|
Growth
|
|---|---|---|
| Workiva Inc. | 6.4x | 14.4% |
| Microsoft Corporation | 12.1x | 14.4% |
| Couchbase, Inc. | 5.6x | 14.2% |
| Dayforce Inc. | 6.4x | 14.0% |
| Paylocity Holding Corporation | 6.4x | 13.9% |
| Tenable Holdings, Inc. | 6.4x | 13.0% |
| Appian Corporation | 5.0x | 12.9% |
| Okta, Inc. | 6.6x | 10.8% |
| HashiCorp, Inc. | 6.4x | 10.7% |
| DigitalOcean Holdings, Inc. | 6.1x | 10.7% |
| Asana, Inc. | 4.5x | 10.7% |
| Adobe Inc. | 10.1x | 10.5% |
| Riskified Ltd. | 1.5x | 10.5% |
| Paycom Software, Inc. | 5.9x | 10.5% |
| PagerDuty, Inc. | 4.2x | 10.3% |
| The Descartes Systems Group Inc. | 11.9x | 10.3% |
| Jamf Holding Corp. | 4.0x | 10.1% |
| Manhattan Associates, Inc. | 14.8x | 10.1% |
| PROS Holdings, Inc. | 5.6x | 10.0% |
| Sprinklr, Inc. | 3.4x | 9.9% |
| BILL Holdings, Inc. | 5.0x | 9.9% |
| Q2 Holdings, Inc. | 4.9x | 9.8% |
| Qualys, Inc. | 9.4x | 9.6% |
| BlackLine, Inc. | 6.6x | 9.4% |
| Salesforce, Inc. | 7.7x | 9.1% |
| RingCentral, Inc. | 2.0x | 8.3% |
| Oracle Corporation | 7.5x | 7.5% |
| BigCommerce Holdings, Inc. | 1.8x | 7.1% |
| Veritone, Inc. | 1.9x | 6.5% |
| Informatica Inc. | 6.6x | 6.4% |
| Amplitude, Inc. | 3.4x | 6.1% |
| DocuSign, Inc. | 3.9x | 5.9% |
| WalkMe Ltd. | 1.8x | 5.2% |
| Twilio Inc. | 1.9x | 5.2% |
| Zuora, Inc. | 2.7x | 5.2% |
| Pegasystems Inc. | 3.7x | 4.6% |
| Box, Inc. | 4.2x | 4.4% |
| Asure Software, Inc. | 1.4x | 3.9% |
| Enghouse Systems Limited | 3.0x | 3.6% |
| SolarWinds Corporation | 3.9x | 3.1% |
| International Business Machines Corporation | 3.5x | 3.1% |
| ZoomInfo Technologies Inc. | 5.4x | 2.6% |
| Progress Software Corporation | 4.0x | 2.5% |
| Open Text Corporation | 3.1x | 2.3% |
| Zoom Video Communications, Inc. | 2.9x | 2.0% |
| Dropbox, Inc. | 3.6x | 1.8% |
| EverCommerce Inc. | 3.2x | 1.4% |
| Domo, Inc. | 1.3x | 0.1% |
| Kaltura, Inc. | 1.0x | 0.0% |
| Yext, Inc. | 1.6x | -1.0% |
| eGain Corporation | 1.3x | -4.5% |
| Expensify, Inc. | 1.0x | -6.5% |
| Rackspace Technology, Inc. | 1.3x | -7.1% |
| Upland Software, Inc. | 1.7x | -8.4% |
| ON24, Inc. | 0.7x | -11.4% |
| American Software, Inc. | 2.9x | -13.0% |
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
- Series A$9.3B
- Series B$24.7B
- Series C$36.5B
- Series D$132.8B
Average
Pre Money Valuation
- Series A$50.1B
- Series B$140.1B
- Series C$165.3B
- Series D$1,935.0B
Average
Post Money Valuation
- Series A$61.9B
- Series B$164.3B
- Series C$192.1B
- Series D$2,150.0B
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.
The information contained in this newsletter is for general information purposes only. The information is provided by Scalar and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the newsletter or the information, products, services, or related graphics contained in the newsletter for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this newsletter.
Every effort is made to keep the newsletter up and running smoothly. However, Scalar takes no responsibility for, and will not be liable for, the newsletter being temporarily unavailable due to technical issues beyond our control.
Data Sources: S&P Global Market Intelligence and PitchBook Data, Inc.
Enterprise Software Operating Metrics provided by Public Comps.