Growth drivers of different tech companies
I recently had an interview for a Tech IBD analyst role and I was asked the following two questions that I struggled with:
Run me through some of the growth drivers for different sub-sectors within Tech e.g. the growth drivers for a SaaS/Software company vs a Hardware company.
How might the operating model / three statements differ between companies in the different sub-sectors for example a SaaS/Software company vs Hardware company and how would you go about building one for each?
Unfortunately, I was unable to answer these well and didn't get invited to the second round (I don't have a Tech IB or Accounting background). The interviewer never gave the answers after so I was hoping someone on here might know?
Thanks.
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Not in tech IBD but here's what I thought of on the spot: 1) for software/SaaS: think about trailing twelve month churn (either in terms of customers or revenue), number of users/unique pageviews/unique accounts, average revenue per user (ARPU), user acquisition cost (CPU), growth capex as % of revenue, annual recurring revenue by contract (% of total revenue) for hardware: number of units sold lol? price per unit? I'm clueless here. for hardware it could be SSD/HDD or PCs or audiovisual...think it really depends but I guess it would be a more similar to industrials/retail/consumer than software.
2) for software you probably have a lot of expenses in stock-based comp, typically have lower leverage, lower inventory while AP/AR matters more, think a lot about marketing/sales and SG&A that are fixed costs that can be flattened with scaling later, amortization is probably what drives D&A (look at patents), intangibles are key for trademark/brand, deferred revenue is probably a huge chunk due to contracts being paid for upfront, low leverage in general because tangible/pp&e asset light so you have minimal tangible collateral to pledge
as for hardware you probably care more about capex buildout and the D&A is likely more built into depreciation, and you also care a lot more about COGS per unit / manufacturing costs that can be broken down
Someone in GS TMT or MS Menlo Park please comment if you exist on this forum lol
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