Most importantly - Warriors are CHAMPIONS! Go Dubs Two Competing Truths It’s an interesting point in time. I’ve never been more excited about the future of cloud software (particularly cloud infrastructure software). We have so much room left to grow into these markets, with many markets still being quite early in their S Curves. At the same time, the slope of innovation, and progression to the cloud, is only getting steeper! Business fundamentals are as great as they’ve ever been, and we’re even seeing businesses hit mature FCF margins while remaining in their hyper-growth phase of maturity. 10 years ago most doubted SaaS companies would ever generate profits. Now we’re seeing companies >$1B ARR, growing 60%+ generating 20-30% FCF margins. It’s truly remarkable. Yet despite this, and despite the fact that most software businesses have already dropped 50-80% from highs, it still feels like there are more reasons to be short term pessimistic than optimistic. There is just so much outside of companies control governing what multiples will do in the short term. With a 1-2 year time horizon I think great opportunities are presenting themselves today. However, even if Point B (call that 2 years from now) is much higher than Point A (today), it doesn’t mean it will be a straight line up from A to B. It very well (and right now feels most likely) could slope down first before heading up.
Shouldn’t GM adjusted CAC payback be done on new ARR instead of Net New ARR? I’m guessing you’re doing Net New since the ARR break ups are not typically called out in public financials?
Great work as always. The other factor at work here is that we may see sector rotation by institutions out of energy names (if you look at the SPDR sector ETFs, only XLE is positive in the last 12 months!) and into the most beaten-up sectors, which we expect to include high-beta cloud software names. As Jamin notes above, the fundamentals are only improving amongst the best names, and the valuations are attractive on a long run average basis. Disagree? No problem. Your local buyout shop is browsing for bargains right now - expect to see many cloud names disappear into PE ownership in the next 12 months or so. (Disclosure, long many cloud names).
Fantastic post. Appreciate you sharing all this info.
Shouldn’t GM adjusted CAC payback be done on new ARR instead of Net New ARR? I’m guessing you’re doing Net New since the ARR break ups are not typically called out in public financials?
Error again... "Top 5 Median: 31.2x" ... not true :)
Great work as always. The other factor at work here is that we may see sector rotation by institutions out of energy names (if you look at the SPDR sector ETFs, only XLE is positive in the last 12 months!) and into the most beaten-up sectors, which we expect to include high-beta cloud software names. As Jamin notes above, the fundamentals are only improving amongst the best names, and the valuations are attractive on a long run average basis. Disagree? No problem. Your local buyout shop is browsing for bargains right now - expect to see many cloud names disappear into PE ownership in the next 12 months or so. (Disclosure, long many cloud names).