SaaS update January 2023: Rebound in the first month of 2023

The SaaS HCA Index, measured on a simple ARR multiple (median) across 19 listed Danish SaaS companies, increased slightly to 4.3x ARR by the end of January 2023 from 4.2x ARR by the end of December 2022. However, the SaaS companies’ share prices increased by a median return of approx. 14% in the first month of 2023 and thus rebounding from larger declines during 2022. In general, the relatively small increase in the median ARR multiple itself is partly explained by new higher reported ARR numbers from some of the SaaS companies, which have updated the market with end of 2022 numbers.

Note the index shows the development over time for the sector, using the latest reported ARR numbers (which differ between the companies). Almost all companies have been tracked for at least a year (the latest SaaS IPO in Denmark was in December 2021). However, we have made some minor adjustments since a few companies suspended or changed methodologies during January. This has not caused any considerable differences in the historical numbers of the ARR multiple, since we are using the median value.
 
The larger and more liquid US-listed SaaS companies – measured by The SaaS Capital Index (annualized current run-rate revenue) – have not been updated yet for January. However, the sector was traded at 6.5x ARR by the end of December 2022, and we expect this to increase as we have seen a large rebound in the US SaaS companies in January as well.

From a macroeconomic perspective, the US 10Y bond yield declined from 3.88% by the end of December 2022 to 3.51% by the end of January 2023. Overall, this had a positive effect on growth stocks, including the SaaS companies.

In February, we will update and cover some of the SaaS companies’ development for Q4 2022 and 2022 in general as the first SaaS companies report their annual report during February with more to come in March. We do not expect any major surprises for 2022, as many companies have either provided numbers to the market or adjusted their guidance recently. More relevant will be the guidance for 2023, indicating whether (most of) the companies (still) are facing longer sales cycles due to the macroeconomic uncertainty.

As we continue to see high interest and receive many questions about the SaaS sector despite the market challenges in 2022, we expect to announce a free newsletter in H1 2023 covering the SaaS sector.

Disclaimer: HC Andersen Capital receives payment for a Corporate Visibility/Digital IR subscription agreement from companies in The SaaS HCA Index. /Kasper Lihn 1 February 2023, 14:27.