Comparing Software Operating Ratios at 3 Different Revenue Levels
We recently launched our On-Demand Dashboards to assist technology CFOs and operating executives to evaluate and manage their performance relative to that of peer companies. OPEXEngine On-Demand Dashboards allow users to QUICKLY ASSEMBLY and DOWNLOAD OPERATING BENCHMARK reports for US-based publicly traded companies using the EDGAR Online database of SEC filings. Subscribers can instantly compare dozens of operating metrics for up to 10 operating companies at a time, for any reporting period.
To demonstrate the value of our new tool, we used the On-Demand Dashboards to analyze a universe of companies that fall into 3 different sized categories. The results generated some interesting comparisons for 2008 year-end results.
We created Financial Dashboards for 3 groups of publicly traded, mid-sized software companies in the following revenue categories:
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The Financial Dashboard automatically calculates an average for each metric across companies, so it was easy to analyze performance across each category. The averages for year over year revenue growth and 3 year CAGR were relatively high for the groups with smaller companies because we chose to look at minimum growth levels to set these benchmarks. The second and third size categories have the additional challenge of growing off of a larger base and often have entered a stage where revenue growth is tempered by a successful focus on profit margins. For this reason, the mix includes some companies with slower revenue growth, but they have solid profitability. Average operating margins were clearly different for each of the 3 size categories for some metrics. Yet, some metrics, such as DSO and employee productivity were surprisingly similar for the largest and the smallest revenue bands. Following are a few examples:
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Metrics
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$70M - $120M
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$120M - $250M
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$250M - $400M
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Year over year revenue growth
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56.6%
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42.2%
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43.7%
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S&M as a % of Revenue
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49.0%
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36.0%
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38.5%
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G&A as a % of Revenue
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18.3%
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12.5%
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13.4%
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R&D as a % of Revenue
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17.9%
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14.5%
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15.1%
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DSO
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73.8
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59.6
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73.5
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Cash Ratio
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2.16
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2.24
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0.81
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Revenue per employee
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$331
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$269
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$347
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Of course, averages are impacted by the peer companies chosen. We also found individual results insightful with some companies deviating from the average, both positively and negatively. Go create your own On-Demand Dashboard by clicking here and create a Financial Dashboard of companies you select.
In this tough economic environment, good benchmarks that help position your company against market leaders, peers and competitors is more critical than ever. Our clients use our On-Demand Dashboards to align management teams with board expectations, develop or reassess budget plans, and to present a competitive landscape to investors or creditors. We are also available to develop custom financial reports with additional metrics. Feel free to contact the staff at OPEXEngine directly at lauren@opexengine.com or 781-891-4149. |
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