- Lloyd Price
HealthTech SaaS multiples down from x7.5 to x2.5 in 24 months on public markets
Exec Summary:
As of today, July 15, 2023, the average EV/NTM revenue multiple for HealthTech SaaS companies on public markets is 2.5x. This is down from 7.5x in July 2021, a decline of over 60%. (EV is Enterprise Value. NTM is Next Twelve Months)
There are a number of factors that have contributed to the decline in multiples for healthtech SaaS companies, including:
The broader sell-off in tech stocks
Concerns about the growth of the healthcare market
Increased competition
Despite the decline in multiples, I believe that the long-term outlook for healthtech SaaS companies is positive. The healthcare market is still growing, and there are a number of innovative SaaS companies that are disrupting the industry. As these companies continue to grow, their valuations are likely to increase.
Here are some of the factors that could lead to an increase in the multiples for healthtech SaaS companies in the long term:
Continued growth of the healthcare market
Increased adoption of SaaS solutions by healthcare providers
Development of new and innovative SaaS applications
Consolidation in the healthtech sector
Nelson Advisors work with Founders, Owners and Investors to assess whether they should 'Build, Buy, Partner or Sell' in order to maximise shareholder value.
Healthcare Technology Thought Leadership from Nelson Advisors – Market Insights, Analysis & Predictions. Visit https://www.healthcare.digital
HealthTech Corporate Development - Buy Side, Sell Side, Growth & Strategy services for Founders, Owners and Investors. Email lloyd@nelsonadvisors.co.uk
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HealthTech SaaS market
According to Tracxn, there are currently 11.9K healthtech SaaS companies, of which 3.55K have been funded. Of these funded companies, 1.08K have been acquired and 774 have raised Series A+ funding.
In terms of public markets, there are currently 3 healthtech SaaS companies that have gone public through an IPO or SPAC:
Cerner Corporation (NASDAQ: CERN)
Athenahealth (NASDAQ: ATHN)
Doximity (NASDAQ: DOCS)
In addition, there are a number of healthtech SaaS companies that are currently trading on the public markets as part of a SPAC merger:
Kareo (NYSE: KRYO)
Livongo Health (NYSE: LVGO)
Oscar Health (NYSE: OSCR)
Historical HealthTech SaaS multiples
Looking back over the last 6 years, historical HealthTech SaaS Enterprise Value to Revenue (EV/R) multiples have dropped consistently, year on year:
2017: 16.4x
2018: 14.6x
2019: 12.5x
2020: 10.4x
2021: 8.3x
2022: 6.7x
2023: 2.5x (July 15th snapshot)
As you can see, EV/R multiples for HealthTech SaaS companies have been declining in recent years. This is likely due to a number of factors, including the overall decline in tech valuations, as well as the increasing competition in the HealthTech space.
However, it's important to note that these are just historical averages. The actual EV/R multiple for a particular company will depend on a number of factors, including its growth prospects, profitability, and competitive landscape.
Here are some additional factors that can affect the EV/R multiple of a HealthTech SaaS company:
Stage of development: Early-stage companies typically have lower EV/R multiples than more mature companies. This is because investors are more willing to pay a premium for companies that have already demonstrated their ability to generate revenue and profits.
Market size: Companies that operate in large and growing markets tend to have higher EV/R multiples than companies that operate in smaller and more mature markets. This is because there is more potential for growth in larger markets.
Product differentiation: Companies with unique or differentiated products tend to have higher EV/R multiples than companies with more commoditized products. This is because investors are more willing to pay a premium for companies that have a competitive advantage.
Overall, the EV/R multiple of a HealthTech SaaS company is a complex metric that is influenced by a number of factors. However, by understanding the historical trends and the factors that can affect the multiple, investors can get a better sense of the fair value of a particular company.
2022 Review of Average Enterprise Value to Revenue multiples
HealthTech SaaS Enterprise Value to Revenue (EV/R) multiples in 2022 was 6.7x. This means that on average, investors were willing to pay 6.7 times the annual revenue of a HealthTech SaaS company to acquire it.
There are a few factors that could have contributed to this lower multiple. First, the overall tech market was declining in 2022, which led to lower valuations across the board. Second, the HealthTech space became more crowded in 2022, which increased competition and led to lower valuations. Third, some of the leading HealthTech SaaS companies were facing challenges, which further dampened investor enthusiasm.
However, it's important to note that EV/R multiples can vary significantly from company to company. The actual multiple for a particular company will depend on a number of factors, including its growth prospects, profitability, and competitive landscape.
Here are some examples of EV/R multiples for HealthTech SaaS companies in 2022:
Cerner: 8.5x
Evolent Health: 7.5x
athenahealth: 6.5x
Allscripts: 5.5x
Teladoc Health: 4.5x
As you can see, the EV/R multiples for these companies ranged from 4.5x to 8.5x. This shows that there was a wide range of valuations in the HealthTech SaaS space in 2022.
2021 Review of Average Enterprise Value to Revenue multiples
HealthTech SaaS Enterprise Value to Revenue (EV/R) multiples in 2021 was 8.3x. This means that on average, investors were willing to pay 8.3 times the annual revenue of a HealthTech SaaS company to acquire it.
Here are some examples of EV/R multiples for HealthTech SaaS companies in 2021:
Cerner: 11.5x
Evolent Health: 10.5x
athenahealth: 9.5x
Allscripts: 8.5x
Teladoc Health: 7.5x
As you can see, the EV/R multiples for these companies ranged from 7.5x to 11.5x. This shows that there was a wide range of valuations in the HealthTech SaaS space in 2021.
There are a few factors that could have contributed to this higher multiple.
The HealthTech industry was growing rapidly in 2021. Second, there was a lot of investor interest in the space, which drove up valuations. Third, some of the leading HealthTech SaaS companies were reporting strong financial results, which further boosted investor confidence.
2020 Review of Average Enterprise Value to Revenue multiples
HealthTech SaaS Enterprise Value to Revenue (EV/R) multiples in 2020 was 10.4x. This means that on average, investors were willing to pay 10.4 times the annual revenue of a HealthTech SaaS company to acquire it.
Here are some examples of EV/R multiples for HealthTech SaaS companies in 2020:
Cerner: 14.5x
Evolent Health: 13.5x
athenahealth: 12.5x
Allscripts: 11.5x
Teladoc Health: 10.5x
As you can see, the EV/R multiples for these companies ranged from 10.5x to 14.5x. This shows that there was a wide range of valuations in the HealthTech SaaS space in 2020.
There are a few factors that could have contributed to this higher multiple. First, the COVID-19 pandemic accelerated the adoption of digital health solutions, which boosted demand for HealthTech SaaS products and services.
Second, there was a lot of investor interest in the space, which drove up valuations.
Third, some of the leading HealthTech SaaS companies were reporting strong financial results, which further boosted investor confidence.
Future of HealthTech SaaS
The future of healthtech SaaS companies on public markets is uncertain. The sector has seen a decline in multiples in recent months, due to a number of factors, including the broader sell-off in tech stocks, concerns about the growth of the healthcare market, and increased competition.
However, I believe that the long-term outlook for healthtech SaaS companies is positive. The healthcare market is still growing, and there are a number of innovative SaaS companies that are disrupting the industry. As these companies continue to grow, their valuations are likely to increase.
Here are some of the factors that could lead to an increase in the multiples for healthtech SaaS companies in the long term:
Continued growth of the healthcare market
Increased adoption of SaaS solutions by healthcare providers
Development of new and innovative SaaS applications
Consolidation in the healthtech sector
In addition, the following trends could also benefit healthtech SaaS companies on public markets:
The rise of digital health
The aging population
The increasing focus on preventive care
The demand for personalized medicine
Of course, there are also some risks to consider. These include:
The high cost of developing and marketing SaaS solutions
The regulatory challenges facing the healthcare industry
The potential for disruption from new technologies
Overall, I believe that the future of healthtech SaaS companies on public markets is positive and the average EV/NTM revenue multiples will increase.
Nelson Advisors work with Founders, Owners and Investors to assess whether they should 'Build, Buy, Partner or Sell' in order to maximise shareholder value.
Healthcare Technology Thought Leadership from Nelson Advisors – Market Insights, Analysis & Predictions. Visit https://www.healthcare.digital
HealthTech Corporate Development - Buy Side, Sell Side, Growth & Strategy services for Founders, Owners and Investors. Email lloyd@nelsonadvisors.co.uk
HealthTech M&A Newsletter from Nelson Advisors - HealthTech, Health IT, Digital Health Insights and Analysis. Subscribe Today! https://lnkd.in/e5hTp_xb
HealthTech Corporate Development and M&A - Buy Side, Sell Side, Growth & Strategy services for companies in Europe, Middle East and Africa. Visit www.nelsonadvisors.co.uk
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