Software LBOs?
would be great if anybody can connect or send over software lbos (as a template or example or case study) to learn about how bookings, arr, etc... might flow, relate, drive off one another. im reading a lot about software related kpis but it would be great to see how it looks like in a model. im not looking for a full blown saas model, but more like something simplified in the context of an lbo that might have simple drivers and preferably metrics like bookings and arr.
Not going to share any of my models, but software models generally follow a repeatable pattern.
I'd start with making a quarterly or annual live ARR waterfall (Beginning ARR + New + Upsell - Downsell - Churn = Ending ARR), which informs recurring revenue (for simplicity you can assume period rec. rev. = avg(BoP, EoP ARR).
From your ARR waterfall you can calculated some of those software KPIs that I'm sure you're thinking about: ARR growth, gross retention, net retention, total bookings (new + upsell), etc.
You can then have some attach rate of non-recurring revenue (think implementation revenue, which would tie to your new bookings ARR). Total revenue = recurring + non-recurring, and from there it will look like a pretty standard P&L.
Happy to answer any other questions you might have.
this is definitely helpful, thanks a lot. have a few follow ups if you dont mind.
yep I guess there are bookings that are "current" like crpo. but i meant more like bookings formulaically is revenue plus change in rpo and maybe im misunderstanding but that doesnt seem like necessarily equal to new + upsell arr. but all information here is helpful thanks again.
e: i realize we may be referring to bookings in a different sense.
you're mixing up ACV and TCV
salesperson makes $100 TCV booking / 5 year contract = $20 ACV booking
after Y1, revenue from contract = 20, RPO = 80; 20 + 80 = 100 TCV, which is what you're alluding to above
when you refer to bookings as part of an ARR waterfall, it's obviously inherently annualized; when you model ARR you only care about the ACV of a booking
when you sell something (i.e., a booking), it's either to an existing or a new customer - it's binary, either new or upsell (though there are multiple "types" of upsell)
This post will be a good time capsule of how people thought prior to the dot com bubble two Quran hai tu crash. ARR is this generation’s version of “clicks” from the first dot com bubble.
The blue owl ceo recently took a look at the largest drawdowns in public saas - which he said was 30 percent. He says their average debt is 30 percent of the capital stack for the leveraged buyouts they finance so if their values go down similarly, they will still be at less than 50 percent loan to value. So no way should their portfolio be materially hurt. Trouble is, the “value” of these companies he is referring to is greater fool hot potato value and no way none of these companies could ever afford to themselves ultimately pay back the debt in full.
thanks for using a lot of buzz words and providing 0 actual insight, senior VP in commercial banking
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