Days Sales Outstanding 2016, The Softletter Benchmark 53

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About the Softletter Benchmark 53

We have completely revamped our Benchmark 50, now the Benchmark 53, to reflect the profound changes the software industry has undergone over the last several years. The profiled are now broken into eight segments that provide a representative overview of industry trends and performance.

The Softletter Benchmark 53 are all publicly-held companies and most of our basic business metrics are derived from documents these companies are legally required to provide to investors. When we believe circumstances warrant it, we do adjust these numbers to reflect financial reality.

Please note that in June we will begin to update these numbers to include the 2015 numbers. The reason for not posting these numbers before is that a) a significant number of companies revise their initial 10-Ks soon after their release and b) because of fiscal year considerations, some 10-Ks are not available at the end of the calendar year.

Days Sales Outstanding (DSO) measures the time in days required to corral your accounts receivables. DSO is used to judge firm’s financial department’s efficiency and its ability to ride herd on your receivables. An effective DSO operation will typically not allow your receivable’s balances to exceed 50% of your selling terms (and 30% is considered a better median). For example, if your terms are typically 30 days, an unpaid bill should be moved into the delinquent category at 45 days. A company that allows its DSO ratio to continually creep up is suffering from either a poorly run accounting department or, in some cases, may be allowing DSO figures to cover serious business problems.

The standout in these numbers continues to be Google, with a three year DSO average of 47 days, up only a day from our last DSO analysis. As we pointed out in our last report, Google’s core business of selling AdWords is close to a real-time enterprise, and if you don’t pay your bill on time, your campaign stops almost immediately. And while the Google Android market is not as that developed as Apple’s, it drives revenue in the same real-time fashion. In contrast to last year’s analysis, Microsoft’s three-year DSO numbers have improved, with 2009’s figures a decided improvement, down to 70 days, a respectable performance from 2008’s 82 days. We attribute the improvement to Microsoft’s clearing of the entire Vista mess off its receivables. Windows 7 is a solid success, Office has, to date, fended off Google Docs, OpenOffice, LibreOffice, etc., etc. and vendors see the need to pay their bills to Redmond on a more timely basis. The company is still not a DSO leader, but it’s role as “banker” to the desktop software market makes it unlikely it will be anytime soon.

Broken out by categories, Desktop led the rankings, an impressive performance given that some of these companies must deal with two-tier distribution. SaaS saw a significant drop in DSO; this is to be expected given the recurring revenue model these companies operate under. Vertical Market and Enterprise both turned in respectable 59-day numbers and Education also impressed with its 2008 51 day performance. Individual standouts in the Benchmark DSO 50 were Skillsoft (160, but that’s better than 2008’s 223!), Novell (149—people tend to delay paying their bills if they think you’re going out of business or being acquired), Magic (8), Pegasystems (2007: 103; 2009: 54) and Intuit (15).

DSO BENCHMARK 53

Big Four Rev 2015  Rev 2014   AR 2015   AR 2014  DSO 2015 DSO 2014 Average 2015-2014
Microsoft $93,580,000,000 $86,833,000,000 $17,908,000,000 $19,544,000,000 70 82 76
Google $74,989,000,000 $66,001,000,000 $11,556,000,000 $9,383,000,000 56 52 54
Apple $233,715,000,000 $182,795,000,000 $16,849,000,000 $17,460,000,000 26 35 31
Oracle $38,226,000,000 $38,275,000,000 $5,618,000,000 $6,087,000,000 54 58 56
 Median  56 52 54
SaaS Sales and Marketing
Endurance (Constant Contact) $741,300,000 $331,678,000 $12,040,000 $26,500,000 6 29 18
Marketo $209,869,000 $149,954,000 $50,678,000 $37,867,000 88 92 90
Netsuite (Oracle) $741,149,000 $556,284,000 $176,720,000 $139,221,000 87 91 89
Salesforce $5,373,586,000 $4,071,003,000 $1,905,506,000 $1,360,837,000 129 122 126
HubSpot $181,943,000 $115,876,000 $25,142,000 $14,270,000 50 45 48
Cvent $187,716,000 $142,245,000 $30,483,000 $44,986,000 59 115 87
LivePerson $239,012,000 $209,931,000 $30,388,000 $31,382,000 46 55 51
 Median  59 91 87
SaaS Enterprise
Workday $787,860,000 $468,938,000 $188,357,000 $92,184,000 87 72 80
Zendesk $208,768,000 $127,049,000 $26,168,000 $11,523,000 46 33 39
Veeva $313,222,000 $210,151,000 $92,661,000 $58,433,000 108 102 105
Demandware $237,279,000 $160,533,000 $60,793,000 $42,441,000 94 97 95
ServiceNow $1,005,480,000 $682,563,000 $203,333,000 $159,171,000 74 85 80
Benefit Focus $185,143,000 $137,420,000 $29,698,000 $21,311,000 59 57 58
LogMeIn $271,600,000 $221,956,000 $16,011,000 $18,286,000 22 30 26
 Median  74 72 80
SaaS B2C Verticals
Angie’s List $344,125,000 $315,011,000 $17,019,000 $15,141,000 18 18 18
Wix $203,518,000 $141,841,000 $6,461,000 $1,050,000 12 3 7
Pandora $1,164,043,000 $920,802,000 $277,075,000 $218,437,000 87 87 87
Blackbaud $637,940,000 $564,421,000 $80,046,000 $77,523,000 46 50 48
Qualsys $164,284,000 $133,579,000 $42,325,000 $32,993,000 94 90 92
Realpage $468,520,000 $404,551,000 $74,192,000 $64,845,000 58 59 58
Callidus $173,087,000 $136,618,000 $43,461,000 $41,623,000 92 111 101
 Median  58 59 58
Mobile B2B
Millenia Media $406,691,000 $296,164,000  NA $101,348,000 0 125 63
Medl  NA $2,805,632  NA $247,953 NA 32 0
Glu Mobile $249,900,000 $223,146,000 $17,956,000 $32,231,000 26 53 40
Turbine $28,252,000 $24,404,000 $12,174,000 $5,102,000 157 76 117
Perion $220,950,000 $388,731,000 $66,662,000 $30,808,000 110 29 70
Intellicheck $7,014,665 $6,613,000 $1,158,972 $792,072 60 44 52
NQ Mobile $406,691,000 $332,324,000 $88,691,000 $87,517,000 80 96 88
 Median  70 53 63
Mobile B2C
King Digital  NA (applying for delisting) $2,260,241,000  NA 0 0
Fitbit $1,857,998,000 $745,433,000 $469,260,000 $238,859,000 92 117 105
Electronic Arts $4,515,000,000 $3,575,000,000 $362,000,000 $327,000,000 29 33 31
Zynga $764,717,000 $690,410,000 $79,610,000 $89,611,000 38 47 43
Majesco $6,693,000 $34,368,000 $283,000 $1,597,000 15 17 16
Yelp $549,711,000 $377,536,000 $52,755,000 $35,593,000 35 34 35
Renren $41,111,000 $46,668,000 $78,000 $160,000 1 1 1
  Median   32 33 58
Social Networking
LinkedIn $2,990,911,000 $2,218,767,000 $603,060,000 $449,048,000 74 74 74
Facebook $17,928,000,000 $12,466,000,000 $2,559,000,000 $1,678,000,000 52 49 51
Twitter $2,218,032,000 $1,403,002,000 $638,694,000 $418,454,000 105 109 107
Groupon $3,119,516,000 $3,042,123,000 $68,175,000 $90,597,000 8 11 9
MeetMe $56,903,773 $44,817,436 $16,509,291 $9,045,269 106 74 90
Jive Software $180,172,000 $162,185,000 $54,090,000 $66,729,000 110 150 130
Sina $880,669,000 $768,241,000 $228,732,000 $259,764,000 95 123 109
  Median   58 59 58
On Premise
Microfocus $834,500,000 $433,100,000 $198,890,000 $77,710,000 87 66 76
Autodesk $2,512,200,000 $2,273,900,000 $653,600,000 $458,900,000 95 74 84
Red Hat $1,789,489,000 $1,534,615,000 $509,715,000 $468,021,000 104 111 108
Progress $377,554,000 $332,533,000 $66,459,000 $68,311,000 64 75 70
Symantec $3,956,000,000 $4,183,000,000 $993,000,000 $1,007,000,000 92 88 90
Nuance $1,931,136,000 $1,923,500,000 $373,162,000 $428,266,000 71 81 76
Ansys $942,753,000 $936,021,000 $91,579,000 $101,229,000 36 40 38
  Median   58 59 58

When looking at DSO performance in the The Big Four, a couple of numbers stand out. The first is Microsoft’s surprisingly high 70 and 82 days. These numbers used to lower in the past, when Microsoft could crack the whip over its channels, but have crept up as the company has become less dominant. Today, Microsoft must deal with a far more unruly environment and is competing fiercely in growing markets such as cloud infrastructure, online applications while dealing with a steadily declining demand for desktop applications and related services.

By contrast, see what a dominant position in markets (and strong channel control), has done for Apple with 26 and 35. Don’t pay those invoices, those iPhones and iPads don’t get delivered. And your stores always pay their bills on time.

In On Premise, Red Hat is a laggard in DSO and we suspect the company is wrestling with the fact it’s a firm with its foot caught in two worlds, on-premise and the cloud. In social networking, Facebook again is a fair-haired child while Twitter’s numbers are unimpressive. In fact, to date, all of Twitter’s numbers less than stellar. Donald, now President, Trump figured out how to monetize Twitter in the last election, but Twitter, to date, hasn’t.

Notice that in SaaS B2C Verticals, companies such as Angie’s List and Wix outperform their larger counterparts, but in B2C markets, billing tends to be monthly and there’s not a great deal of negotiating over terms.

Also note how difficult it is for companies to reach our “magic” benchmark of 45 days. A few firms do, but not many. Prying cash from a customer’s tightly clenched cash register is always a challenge.

Our upcoming benchmark is Operating Income. To gain access to the complete and ongoing Benchmark 53 metrics, please subscribe to Softletter.

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