January 2022
Public Market Valuations – Return to Fundamentals
Jon Guido and Doug Hurst
C-Suite SaaS Solutions Report
1
AGC Partners
PUBLIC VALUATION RECONCILIATION
Through early Q4, the 3 C-Suite Indices and the BVP SaaS Index outperformed
the S&P Index as much as 5x (see page 4) as public investors rewarded revenue
growth compared to the private markets which emphasized SaaS fundamentals
At the same time, the public trading multiples (20x+ ARR) towered over the
private market multiples
Private market valuations have been and continue to be primarily driven off of
SaaS fundamentals - revenue growth, Rule of 40, and Cash Flow Margin
While the S&P Index has remained flat over the last two months, SaaS stock
prices have been hammered (see page 4)
Workforce Management (-22%), SaaS Index (-28%), Workflow Management (-29%),
CFO Suite (-33%)
As such, the revenue multiples of public SaaS stock have taken a significant hit (see page 9)
Workforce Management (26x to 17x), CFO Suite (24x to 14x), Workflow Management (25x to 16x), SaaS Index (19x to 13x)
Public stocks exhibiting slowing revenue growth, weak efficiency (below or near 40 on the Rule of 40) and negative cash flow
margins have substantially underperformed comparable SaaS companies and the general SaaS index
When C-Suite SaaS companies are grouped by revenue multiple ranges, those that are trading over 20x ARR have significantly
better SaaS fundamentals (see page 6, right)
>20x
13x - 20x
<13x
62% Rule of 40
59% Revenue Growth
80% Gross Margin
46%
39%
73%
40%
26%
74%
Fundamentals by Revenue Multiple
2
AGC Partners
RETURN TO FUNDAMENTALS
Over the last ten weeks (see page 7, right), the
stock price performance of the companies with
weaker
fundamentals
have
substantially
underperformed those with
the stronger
fundamentals
We believe the bifurcation in the valuation
multiples between the “haves” and “have-nots”
in the public and private markets will continue
to expand
While the headline stock price declines are
alarming, they will have a mute