Revenue Per Employee 2017, The Softletter Benchmark 53 (Softletter subscriber access)

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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. In most cases these are 10-Ks and equivalents, supplemented by expert analysis of the numbers.

Revenue per Employee is one of the most popular financial metrics by which to measure a software company’s performance. RPE is indeed a useful productivity benchmark, but several caveats apply. One is that a healthy RPE does not necessarily translate to a dynamic, growing company. That’s why despite its relatively handsome RPE, Microsoft stock has not excited anyone in the last several years. Larger companies do tend to generate large RPE numbers; business does indeed benefit from scale, as the Big Four’s substantial numbers demonstrate. But when companies are growing rapidly (something that makes IPOs exciting and the hearts of investors beat faster), RPE can suffer greatly as revenue is devoted to hiring, R&D, and sales and marketing programs that drive growth.

Another point to remember is that a major layoff can temporarily boost RPE; however, this is usually only a temporary fix. But CFO’s love to point to the sugar of enhanced RPE numbers as proof of increased efficiency and health at a struggling company. Sometimes there’s a big crash at the end of the rush.

When analyzing RPE, the sweet spot you should be looking for is:

  • Is the company in an active, growing market segment?
  • Is the company outperforming its contemporaries in terms of RPE?
  • Has the company avoided laying off significant numbers of employees in the previous fiscal year?

If the answer is to the above is yes, RPE can be used as a significant indicator of growth and good management.

Big Four Rev 2015 Rev 2014 Employees 2015 Employees 2014 RPE 2015 RPE 2014 Average
Microsoft $93,580,000,000 $86,833,000,000 118,000 128,000 $793,051 $678,383 $735,717
Google $74,989,000,000 $66,001,000,000 61,814 53,600 $1,213,139 $1,231,362 $1,222,251
Apple $233,715,000,000 $182,795,000,000 110,000 92,600 $2,124,682 $1,974,028 $2,049,355
Oracle $38,226,000,000 $38,275,000,000 132,000 122,000 $289,591 $313,730 $301,660
Median $1,003,095 $954,872 $978,984
SaaS Sales and Marketing              
Endurance (Constant Contact) $741,300,000 $331,678,000 2,593 477 $285,885 $695,342 $490,613
Marketo $209,869,000 $149,954,000 1,500 715 $139,913 $209,726 $174,819
Netsuite $741,149,000 $556,284,000 4,603 3,357 $161,014 $165,709 $163,362
Salesforce $5,373,586,000 $4,071,003,000 16,000 13,300 $335,849 $306,090 $320,970
HubSpot $181,943,000 $115,876,000 1,157 785 $157,254 $147,613 $152,433
Cvent $187,716,000 $142,245,000 1750 1,740 $107,266 $81,750 $94,508
LivePerson $239,012,000 $209,931,000 1,006 1,058 $237,586 $198,422 $218,004
Median $161,014 $198,422 $179,718
SaaS Enterprise
Workday $787,860,000 $468,938,000 3,750 2,600 $210,096 $180,361 $195,228
Zendesk $208,768,000 $127,049,000 1268 806 $164,644 $157,629 $161,136
Veeva $313,222,000 $210,151,000 951 725 $329,361 $289,863 $309,612
Demandware $237,279,000 $160,533,000 943 590 $251,621 $272,090 $261,856
ServiceNow $1,005,480,000 $682,563,000 3,686 2,826 $272,784 $241,530 $257,157
Benefit Focus $185,143,000 $137,420,000 1,450 1,314 $127,685 $104,581 $116,133
LogMeIn $271,600,000 $221,956,000 1,006 804 $269,980 $276,065 $273,022
Median $251,621 $241,530 $246,576
SaaS B2C Verticals              
Angie’s List $344,125,000 $315,011,000 1567 1,950 $219,608 $161,544 $190,576
Wix $203,518,000 $141,841,000 1,067 851 $190,739 $166,676 $178,707
Pandora $1,164,043,000 $920,802,000 2,219 1,414 $524,580 $651,204 $587,892
Blackbaud $637,940,000 $564,421,000 3,095 3,033 $206,120 $186,093 $196,106
Qualsys $164,284,000 $133,579,000 510 431 $322,125 $309,928 $316,027
Realpage $468,520,000 $404,551,000 4,100 3,875 $114,273 $104,400 $109,337
Callidus $173,087,000 $136,618,000 750 741 $230,783 $184,370 $207,576
Median $219,608 $184,370 $196,106
Mobile B2B
Millenia Media $406,691,000 $296,164,000 NA 636 NA $465,667 $465,667
Medl $0 $2,805,632 NA 26 NA $107,909 $107,909
Glu Mobile $249,900,000 $223,146,000 750 653 $333,200 $341,724 $337,462
Turbine $28,252,000 $24,404,000 157 101 $179,949 $241,624 $210,786
Perion $220,950,000 $388,731,000 646 439 $342,028 $885,492 $613,760
Intellicheck $7,014,665 $6,613,000 62 62 $113,140 $106,661 $109,901
NQ Mobile $406,691,000 $332,324,000 1,019 1,742 $399,108 $190,772 $294,940
Median $333,200 $241,624 $287,412
Mobile B2C              
King Digital NA (applying for delisting) $2,260,241,000 1,101 1200  NA $1,883,534  NA
Fitbit $1,857,998,000 $745,433,000 905 469 $2,053,036 $1,589,409 $1,821,223
Electronic Arts $4,515,000,000 $3,575,000,000 8400 8,300 $537,500 $430,723 $484,111
Zynga $764,717,000 $690,410,000 1669 1,974 $458,189 $349,752 $403,970
Majesco $6,693,000 $34,368,000 5 23 $1,338,600 $1,494,261 $1,416,430
Yelp $549,711,000 $377,536,000 3826 2,711 $143,678 $139,261 $141,469
Renren $41,111,000 $46,668,000 1078 1,602 $38,136 $29,131 $33,634
Median $497,844 $430,723 $464,284
Social Networking
LinkedIn $2,990,911,000 $2,218,767,000 9,372 6,897 $319,133 $321,700 $320,416
Facebook $17,928,000,000 $12,466,000,000 12,691 9,199 $1,412,655 $1,355,147 $1,383,901
Twitter $2,218,032,000 $1,403,002,000 3,898 3,638 $569,018 $385,652 $477,335
Groupon $3,119,516,000 $3,042,123,000 9872 11843 $315,996 $256,871 $286,434
MeetMe $56,903,773 $44,817,436 104 125 $547,152 $358,539 $452,846
Jive $180,172,000 $162,185,000 723 658 $249,201 $246,482 $247,841
Sina $743,535,000 $621,705,000 7,646 8,021 $97,245 $77,510 $87,377
Median $319,133 $321,700 $320,416
On Premise
Microfocus $834,500,000 $433,100,000 4561 1,356 $182,964 $319,395 $251,180
Autodesk $2,512,200,000 $2,273,900,000 8,823 7,600 $284,733 $299,197 $291,965
Red Hat $1,789,489,000 $1,534,615,000 7,300 6,300 $245,135 $243,590 $244,363
Progress $377,554,000 $332,533,000 1,766 1,075 $213,790 $309,333 $261,562
Symantec $3,956,000,000 $4,183,000,000 19,000 20,800 $208,211 $201,106 $204,658
Nuance $1,931,136,000 $1,923,500,000 13,200 14,000 $146,298 $137,393 $141,846
Ansys $942,753,000 $936,021,000 2800 2,700 $336,698 $346,674 $341,686
Median $213,790 $299,197 $256,494

Softletter RPE 2017 Benchmark 53 Analysis

When looking at RPE performance in the The Big Four, Oracle’s low number stands out sharply. What accounts for this? One problem is that Oracle, like many software companies, was caught flat footed by the rapid rise of SaaS and mobile from 2010 to 2015. Many large software firms thought that they had until the 2020s to adjust to the growth of online software and services. But the Cloud dropped down on the necks of the giants like the big snake in the movie Ananconda. Oracle, which in the 1990s and noughts supplied the underlying database infrastructure on which many companies ran, should have been able to withstand the Big Swallow. But the company stuck too long with its maddening per CPU pricing model and all of a sudden Amazon’s AWS service appeared. A miracle of pricing simplicty in contrast to Oracle and scaleable from small to large companies, Oracle’s ability to sell enterprise DBMS licenses slowed dramaticallly.

Likewise, Microsoft, the platform company since 1995 and the demise of IBM’s OS/2,  was caught flat footed by AWS. In the Softletter SaaS Report, the number of SaaS companies reporting they’re relying on AWS vs. Azure is 61% to 14%. If in 2010 you’d predicted that Microsoft would be struggling for Cloud infrastructure supermacy with a company that got its start selling books out of garage, you’d have been greeted by giggles from industry pundits.

In Sales and Marketing, the RPE contrast between Netsuite and Salesforce is interesting. Both were assisted and funded by Larry Ellison in their startup days, but over the years it was Salesforce that became the fair-haired child, while Netsuite always lagged behind. Oracle has spent a great deal of time and money creating its own financial service offerings, but is hoping that the Netsuite acquisition will transfer some SaaS dynamism into its veins. We will see.

In the same cohort, Cvent seems overstuffed and under performing. Their RPE indicates a company struggling  to grow and maintain its revenue growth. We’ll be keeping a close eye on it.

In Social Networking, the delta between Facebook and the rest of the members in the cohort is striking. It may be time to move the social giant to the Big Four. We also think the contrast between LinkedIn (two year median of $320,416), which was purchased by Microsoft at about eight times earnings) and Twitter (two year median of $477,335) which can’t get anybody to buy it, intriguing. The joke is that President Trump figured out how to monetize Twitter to the tune of an estimated $2B in free media, but Twitter hasn’t. But as the RPE shows, Twitter is generating revenue. The company is learning how to better leverage its real time event capabilities and developing new advertising strategies. Maybe it’s time to show Twitter some more respect.

To gain access to the complete and ongoing Benchmark 53 metrics, please subscribe to Softletter.

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