Clouded Judgement 10.2.20

Every week I’ll provide updates on the latest trends in SaaS valuations, earnings announcements, and highlight any significant news. Follow along to stay up to date!

Highlight of the Week - Morgan Stanley Identity Access Management (IAM) Report

Yesterday Morgan Stanley published a very bullish report on the IAM space, citing a TAM of >$30B, when current industry TAM estimates from IDC are ~$8B. Their estimates are higher because they believe growing cloud adoption opens up a much larger user base and higher ASPs over time. Big winners are Okta, SailPoint and CyberArk

The market is also only ~20% cloud penetrated (a key theme for many SaaS markets!). There’s just so much room for these SaaS businesses to grow as markets naturally expand with cloud adoption.

Top 10 EV / NTM Revenue Multiples

Top 10 Weekly Share Price Movement

Update on Multiples

SaaS businesses are valued on a multiple of their revenue - in most cases the projected revenue for the next 12 months. Multiples shown below are calculated by taking the Enterprise Value (market cap + debt - cash) / NTM revenue. In the buckets below I consider high growth >30% projected NTM growth, mid growth 15%-30% and low growth <15%

Overall Stats:

  • Overall Median: 14.8x

  • Top 5 Median: 42.3x

  • 3 Month Trailing Average: 14.0x

  • 1 Year Trailing Average: 11.2x

Bucketed by Growth:

  • High Growth Median: 31.6x

  • Mid Growth Median: 16.8x

  • Low Growth Median: 8.8x

Operating Metrics

  • Median NTM growth rate: 19%

  • Median LTM growth rate: 31%

  • Median Gross Margin: 73%

  • Median Operating Margin (15%)

  • Median FCF Margin: 4%

  • Median Net Retention: 116%

  • Median CAC Payback: 32 months


  • Datadog announced a strategic partnership with Microsoft Azure. Datadog will now be available in the Azure console as a first class service. This means that Azure customers will be able to implement Datadog as a monitoring solution for their cloud workloads through new streamlined workflows that cover everything from procurement to configuration. The improved onboarding experience makes Datadog setup automatic, so new users can start monitoring the health and performance of their applications with Datadog quickly, whether they are based entirely in Azure or spread across hybrid or multi-cloud environments

  • Twilio announced a number of interesting new products at their Signal conference. 1) Twilio Frontline: a mobile application that allows field workers to seamlessly and securely engage directly with customers from their personal devices. 2) Twilio Video Web RTC Go: a free toolkit that eliminates the complexity of building on top of WebRTC for video messaging. 3) Twilio Flex Ecosystem: since its launch on the SIGNAL stage in 2018 Twilio Flex has added more than 100 new features. The Flex Ecosystem gives organizations access to more than 30 validated partner solutions from partners such as Google, Salesforce, Zendesk, and Calabrio. 4) Event Streams: a single API that aggregates data from all Twilio powered experiences — Voice, SMS, Super SIM, TaskRouter, and other services — enabling real time monitoring and reporting across every communication channel.

  • Twilio also pre-announced an earnings beat for Q3

  • Docusign released DocuSign Analyzer as they push more into contract management (on top of their Seal software acquisition) The product streamlines the process of reviewing and negotiating agreements when companies first receive them. It uses AI to provide legal, sales, procurement and other stakeholders with clear and actionable insight into the risks and opportunities in the documents they are being asked to review and sign

  • Cloudflare launched Cloudflare Radar, a free public tool that lets anyone view global traffic and security trends across the Internet as they happen

Comps Output

Rule of 40 shows LTM growth rate + LTM FCF Margin. FCF calculated as Cash Flow from Operations - Capital Expenditures