Software-as-a-Service (SaaS) update – December 2022: Danish ARR sector median multiple declined to a new lower level

The SaaS HCA Index, measured on a simple ARR multiple (median) across 19 listed Danish SaaS companies, declined to 4.2x ARR by the end of December 2022 from 4.6x ARR by the end of November 2022. Note the index shows the development over time for the sector, using the latest reported ARR numbers (which differ between the companies), and almost all companies have been tracked for at least a year (the latest SaaS IPO was in December 2021).
 
The larger and more liquid US-listed SaaS companies – measured by The SaaS Capital Index – have not been updated yet. However, the sector was traded at 6.3x ARR by the end of November 2022.

From a macroeconomic perspective, the US 10Y bond yield increased from 3.61% by the end of November 2022 to 3.88% by the end of December 2022. Overall, this had a negative effect on growth stocks, and, in general, we also saw declining share prices in December 2022.  

The share price of many Danish SaaS companies also declined in December 2022, and we have also seen some guidance downgrades for the full year following longer sales cycles and delays in decisions due to macroeconomic uncertainty. The decline may be further affected by tax optimization with some investors selling out of shares with negative returns.

Looking at the share price performance for the full year 2022, the average return for the Danish SaaS sector (equal-weighted) was approx. -48%. The best-performing share in the sector was Agillic after several guidance upgrades, down approx. -8.1%. SameSystem declined the most by -83.5% after guidance downgrades, organizational and strategic changes, and a recent suspension of ARR guidance.  However, we have seen large upward share price movements in some SaaS companies here in the first week of January. We will follow up on this in the January 2023 update. 

As we continue to see high interest and receive many questions about the SaaS sector despite the market challenges, 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 (including Agillic mentioned in the text). /Kasper Lihn 5 January 2023, 14:45.