+
The SaaS Income
Statement
About SaaSOptics
Tim McCormick
CEO
570+ Customers in
17 Countries
$4.1B in Managed
Customer Revenue
$12B+ in
Customer-Raised
Capital in 1,800+
Rounds
About SaaS Capital
62
Companies Funded
$630M
of Equity Value Created
12
Years Lending
Todd Gardner
Founder and Managing Director
Agenda
1. Why does the Income Statement matter so
much?
2. GAAP vs cash: Which one makes sense and
when?
3. The “ideal” income statement layout for VCs,
lenders, board members, and the management
team
4. The SaaS Momentum Chart
5. Spending Benchmarks
6. ASC 606…ugh
7. Questions
Polling Question
What is your current ARR?
1. Under $1 million
2. $1 to $3 million
3. $3 to $10 million
4. Over $10 million
The Income Statement
A GAAP Income Statement is the best source for
understanding growth and burn:
• When looking at growth, bookings are important, however:
• Not always commonly defined and reported
• Don’t always translate into revenue and cash (failed implementation)
• Hard to see growth trends due to lumpiness/backlog
• When looking at burn, the cash flow statement is helpful, however:
• Working capital swings in AR can swing monthly cash flows dramatically
• Cash flow statement is best for near-term, seasonal, tactical planning
• At “steady state,” in the long run, Net Income = Burn (Not EBIT or EBITDA)
Polling Question
What accounting method do you use to
recognize revenue?
1. Cash
2. GAAP
Cash-Based Accounting
• Benefits of Cash-Based Revenue Recognition
•
Is a fine way to get started, simple and easy
• Provides direct visibility into monthly cash billings
• Used by the majority of SaaS companies under $2 million in
ARR
• Can be used indefinitely for companies billing monthly and
not raising institutional capital
• Disadvantages
• Provides less visibility on underlying performance trends (see
chart to follow)
• Does not support many important SaaS financial metrics
• Will not support a later-stage capital investment
• Necessitates a separate “MRR sheet” (not tied to the financials)
GAAP Allow