Welcome to the latest edition of the Silverpeak Benchmark report: Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.
- On average, EV/Revenue and EV/EBITDA multiples fell 16% across all categories. Europe and UK were impacted more severely, with an average 22% decrease compared to an average 11% decrease between the US categories.
- This widespread decline can be attributed to the uncertainty brought about by factors including: the ongoing pandemic, particularly the impact of city-wide lockdowns in China; geopolitical tensions, notably the war between Russia and Ukraine; and significant inflation that was already rising due to supply chain and recruitment issues across developed economies.
- Unsurprisingly, the market is valuing profitability over growth at this time: EV/Revenue multiples have decreased significantly more than EV/EBITDA multiples, both quarter-on-quarter and year-on-year.
- The deeptech and Industrial sectors are the most volatile of all the sectors covered in the report. On the one hand, they showed the largest (positive) year-on-year EV/Revenue growth, but on the other hand, they also experienced the biggest declines in quarter-on-quarter EV/EBITDA index.