03.06.2012 top 10 saa siest companies - martinwolf

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<ul><li> 1. Leaders Among Leaders The martinwolf Report on The Top 10 SaaS Companies of 2011 Based on the MW IT Index February 2012 </li> <li> 2. About This ReportThe martinwolf M&amp;A Advisors Report on The Top 10 SaaS Companies of 2011 is basedon the MW IT Index, a proprietary analysis of market value for key segments in informationtechnology.The Index uses securities that are weighted according to the market value of theiroutstanding shares. The Index includes 120 IT companies traded in the U.S. stock markets(NYSE, NASDAQ, and OTC) that are a composite representative sampling of enterprisevalues in the following categories: IT Services &amp; Business Process Outsourcing (BPO) 52 companies, including seven in BPO IT Supply Chain Services 23 companies Software 45 companies, including 20 in Software as a Service (SaaS)The MW IT Index starts on December 31, 2007 with a value of 1000. Companies used forthe MW IT Index must be traded on a U.S. stock exchange. See page 9 for the formula usedto determine the MW IT Index value. For a complete copy of the MW IT Index Report for2011, visit www.martinwolf.com/mw-index.The 20 SaaS companies included in the Index share the following characteristics: Publicly traded with revenue of approximately $100 million, at least 70% of which is recurring revenue from the SaaS delivery model Business/enterprise customers (as opposed to consumers) Recognized leaders in their target SaaS segmentsThe MW IT Index SaaS companies in 2011 were: CNQR Concur Technologies, Inc. N NetSuite Inc. CTCT Constant Contact, Inc. OPEN OpenTable, Inc. CNVO Convio, Inc. RP RealPage, Inc. TRAK DealerTrack Holdings, Inc. RNOW RightNow Technologies Inc.* DMAN DemandTec, Inc.* CRM Salesforce.com KNXA Kenexa Corp. SQI SciQuest, Inc. LPSN LivePerson Inc. SFSF SuccessFactors, Inc.* LOGM LogMeIn, Inc. TLEO Taleo Corp. SAAS inContact, Inc. ULTI The Ultimate Software Group, Inc. IL IntraLinks Holdings, Inc. VOCS Vocus Inc. *These companies were acquired in 2011 and will not be included in the MW IT Index in 2012. 2 </li> <li> 3. Key FindingsThe MW IT Index showed that companies in the SaaS category were experiencingaccelerated growth in 2011 that led to a 163% premium in revenue valuation multiplebased on 12 months trailing revenue compared to traditional software companies.We expect this accelerated growth in the SaaS category to continue for the next 12 to 24months at least. However, as the market matures companies are beginning to segment andspecialize by industry and these factors will affect growth rates and valuations for individualcompanies.For example, while we expect SaaS companiesgenerally to continue outpacing traditional software ingrowth and valuation multiples in 2012, we also expectcompanies in newer SaaS segments such asInfrastructure as a Service (IaaS) and Platform as aService (PaaS) to grow faster than other SaaScompanies. We also expect SaaS companies withspecialized solutions for industries such as HR, realestate, restaurant service and others to grow faster.Moreover, 2011 was notable because it marked aheating up of the battle for supremacy in SaaS amongthe largest enterprise software players, especially IBM,Oracle and SAP. The SaaS strategies of theseenterprise software behemoths had already been putting pressure on the enterprise value ofthe de facto SaaS market leader, Salesforce.com, whose stock peaked in July 2011 at $159per share.But the pressure on Salesforce.com increased dramatically in 4Q11 with announcements ofOracles acquisition of RightNow Technologies, SAPs purchase of SuccessFactors andIBMs purchase of DemandTec all SaaS companies included in the MW IT Index in 2011.As of this writing, February 7, 2012, Salesforce.coms stock price was approximately $123per share.As a result of this competition from enterprise software players, in 2012 we expectSalesforce.com to continue buying small companies to enhance its mobile, social, andcloud-computing portfolio, as it did with its purchase of Model Metrics in November 2011.Mobile and social technologies represent the future of enterprise cloud computing andthrough group hire or IP acquisitions, Salesforce.com will essentially outsource a portion ofits R&amp;D to accelerate its growth.While these acquisitions will shore up Salesforce.coms enterprise value somewhat, themarket tends to reward organic growth over growth through acquisition. Therefore, weexpect continued valuation pressure on Salesforce.com in 2012. 3 </li> <li> 4. Overall, the MW IT Index for 2011 points to continued blockbuster growth for the SaaScategory in 2012, while the price decline of Salesforce.com suggests slower overallenterprise value growth for SaaS companies and especially for more established players.Not all SaaS companies are created equalIn addition, because SaaS companies high growth will continue in 2012, we expect highervaluations for SaaS companies when compared to traditional software companies. But asthe SaaS industry matures, we see younger companies giving established players a run fortheir money when itcomes to growth and Chart 1valuations. This is The Top 10 SaaSiest vs. The Second 10 SaaSy Mediancreating a new class of Enterprise Value/Last 12 months Revenue (X)leaders among leaders 8.0and a distinction between 7.4xcompanies that are the 7.0SaaSiest andcompanies that are 6.0merely SaaSy. 5.0This has implications for 4.0both buyers and sellers 3.2xof SaaS companies. 3.0Buyers should expect to 2.0pay higher prices foryoung SaaS companies 1.0in hot segments andsellers can look forward - SaaSiest SaaSyto higher prices for theircompanies depending onwhich segments they serve. Thats because when it comes to valuations, what a companydoes matters.Therefore, at this phase in the development of SaaS market, we see a natural split of the 20SaaS leaders represented in the MW IT Index into two groups based on enterprise value:the Top 10 SaaSiest Companies and the Second 10 SaaSy Companies. 4 </li> <li> 5. The Top 10 SaaSiest vs. The Second 10 SaaSy Chart 2What is the difference The Top 10 SaaSiest vs. The Second 10 SaaSy Median Growthbetween the Top 10 Rates (%)SaaSiest and the Second 30%10 SaaSy companies? First 27%and foremost, the median 25%enterprise value based on 22%12 months trailing revenue 20%of the Top 10 SaaSiest ismore than 2x the Second 15%10 SaaSy. (See Chart 1.)The driver of these higher 10%valuations for the Top 10are clear: The median 5%growth rate of the Top 10over the past 12 months 0%was 20% higher than the SaaSiest SaaSySecond 10 while grossmargins for the Top 10 overthe past 12 months were 5%higher. (See Charts 2 and3.) Chart 3 The Top 10 SaaSiest vs. The Second 10 SaaSyIn simple terms, the Median Gross Margins (%)companies that can grow the 100%fastest and most profitably 90%will earn higher valuations 80%and our designation of the 71%SaaSiest. 70% 65% 60%Looking ahead, we expect 50%enterprise valuations of SaaScompanies to vary even more 40%as the industry matures. 30% 20% 10% 0% SaaSiest SaaSy 5 </li> <li> 6. The Top 10 SaaSiest CompaniesBased on the MW IT Index of 2011, here are the Top 10 SaaSiest Companies. Ticker Company #1 N NetSuite Inc. #2 SFSF SuccessFactors, Inc. #3 OPEN OpenTable, Inc. #4 RP RealPage, Inc. #5 CRM Salesforce.com #6 CNQR Concur Technologies, Inc. #7 ULTI The Ultimate Software Group, Inc. #8 LOGM LogMeIn, Inc. #9 SQI SciQuest, Inc. #10 RNOW RightNow Technologies, Inc.1. NetSuite Inc.Founded in 1998, NetSuite was the first to market with a SaaS-based ERP solution, beatingout SAP and Oracle for the honors.Recognized by Gartner as the fastest growing top 10 financial management solution,NetSuite has considerable market momentum and from our vantage point, will be hard tobeat over the next 12 to 24 months. http://www.netsuite.com/2. SuccessFactors, Inc.SuccessFactors is a standout leader in SaaS-based human capital management adistinction that SAP recognized in December 2011 when it announced it would purchase thecompany, an acquisition that was completed in January 2012.Now, SuccessFactors must integrate its many acquisitions, improve its suite of services andbuild its customer base to pay off for SAP. Our view is that they will do it. http://www.successfactors.com/ 6 </li> <li> 7. 3. OpenTable, Inc.OpenTable is a leading provider of free, real-time online restaurant reservations for dinersand reservation and guest management solutions for restaurants. The company has morethan 20,000 restaurant customers and since 1998 has seated more than 250 million dinersaround the world.To achieve its leadership position, OpenTable employed the time-honored razor andrazorblade business model. If youve ever purchased razors and their replacement blades,you know the model well: razors are priced inexpensively but the blades are very expensive.The OpenTable version of the model involves giving restaurants computer hardware at nocost, and then earning revenue through hardware installation fees, a monthly subscriptionfee and a fee for every diner seated.For its second act, OpenTable now is leveraging its millions of reservations and traffic into amarketing network, selling advertising and promotional offers for restaurant discounts. http://www.opentable.com/4. RealPage, Inc.RealPage is a leading provider of SaaS-based products and services for the rental housingindustry. With nearly 7,000 customers managing more than 6 million rental housing units,the company has reached critical mass in terms of customer base, revenues and margins.Having established a beachhead with its SaaS property management solution, RealPagesgrowth is driven by additional complementary sales and marketing, asset optimization, riskmitigation, billing and utility management and spend management capabilities as well asacquisitions of complementary technologies. http://www.realpage.com/5. Salesforce.comSalesforce.com is the company that pioneered enterprise SaaS, and has been a key drivingforce in the market for the past decade. Today it is the de facto standard platform for SaaSapplications for business. With superb strategic and execution skills, at this rateSalesforce.com could well become to the cloud what Microsoft has been to the PC.As the SaaS market leader with more than $2 billion in annual revenues 90% recurringfrom the SaaS delivery model the company is nevertheless experiencing valuationpressure as established enterprise software companies make major plays in SaaS throughacquisitions. For example, since Oracles acquisition of RightNow Technologies, and marketspeculation 7 </li> <li> 8. that Salesforce.coms growth rate may be slowing, the company has taken a valuation hit of25-30%. http://www.salesforce.com/6. Concur Technologies, Inc.Concur is a leading provider of integrated travel and expense management solutions (T&amp;E).Founded in 1993, it is one of the few companies that has migrated successfully from alegacy software provider to a cloud-based provider. Moreoever, Concur is becomingubiquitous on mobile platforms and is the leading T&amp;E app integrated into theSalesforce.com. www.concur.com 7. The Ultimate Software Group, Inc.As a...</li></ul>