The strong EBITDA margins reflect the pricing power associated with highly specialized applications for a particular vertical.
This excerpt is from our complimentary Q1 2012 Software Industry Financial Report which can be downloaded here: http://www.softwareequity.com/research_reports.aspx
The SEG SaaS Index, consisting of 28 pure play SaaS providers, now has sufficient critical mass to establish and track four distinct subcategories: CRM & Marketing; ERP & Supply Chain; Workforce Management; and Vertically Focused providers (Figure 17). Each category posted a TTM revenue growth rate above the median 27.8% growth rate for the overall Index. ERP & Supply Chain had the most improved TTM revenue growth rate in 1Q12 measured YoY, the fifth consecutive quarter growth rates have increased. SaaS companies in this category are benefitting from growing enterprise and SMB acceptance of cloud-based, remotely hosted applications. Vertically focused SaaS providers achieved EBITDA margins of 15.3% in 1Q12, 52% higher than the SaaS sector median of 10.1%. The strong EBITDA margins reflect the pricing power associated with highly specialized applications for a particular vertical.