After a general upwards trend in our last several reports, the FOCUS Carrier-Focused Telecom Technology Index (CFTTI) reversed course and dropped 7.0% in our winter three-month reporting period. This was despite a reasonably favorable market environment in which the S&P 500 gained 1.0% and the NASDAQ gained 1.8%. Sector losses were broad-based as only one CFTTI sub sector managed to deliver a positive return. For the full year, the CFTTI is still in the black with a year-over-year return of 19.3%. Even with this strong performance, the sector still lags both the 26.1% return in the S&P 500 and the 27.4% return in the NASDAQ over the past 12 months. Sector multiples have shown meaningful increases com- pared to this same time last year. The sector revenue multiple went from 2.2x a year ago to 2.5x currently, while the sector EBITDA multiple increased from 11.3x to 12.0x.
While sector performance has cooled off significantly since our last report, the FOCUS Enterprise-Focused Telecom Technology Index (EFTTI) still managed to deliver a positive return of 1.5% in this most recent three-month period. The sector underperformed the broader indices over this time frame as it lagged both the S&P 500 (up 4.8%) and the NASDAQ (up 5.6%).The situation looks better when measured over the full year as the EFTTI is up 37.8% in the past 12 months. While this still lags the 39.2% gain in the S&P 500 and the 39.6% gain in the NASDAQ, the gap is extremely narrow. Multiples are up strongly com- pared to this time last year.The sub sector revenue multiple closed out the period at 7.0x (up from 5.3x a year ago) while the EBITDA multiple ended up at 27.0x (up from 19.9x a year ago).
It was a rough three months for the FOCUS Communications Service Provider Index (CSPI) as it ended the period 6.2% below where it began. This significantly underperformed both the 0.2% gain in the S&P 500 and the 0.4% loss in the NASDAQ. The CSPI also lags the broader indices in terms of year-over-year performance as its 3.6% gain compares unfavorably with both the 28.1% gain in the S&P 500 and the 29.4% gain in the NASDAQ. Sector multiples are slightly higher than they were a year ago.The sector revenue multiple ticked up from 2.8x to 2.9x, while the EBITDA multiple increased from 7.9x to 8.2x.
After several periods of gains, the FOCUS Telecom Business Services Index (TBSI) slipped into the black with a loss of 0.5% over the past three months. In addition to its negative performance, the sub sector trailed the broader indices as the S&P 500 rose 0.2% and the NASDAQ dipped 0.4% over the same time period. Even with this period’s decline, performance for the full year remains strong. The TBSI is up 41.2% over the past 12 months, which handily outperforms both the 28.1% gain in the S&P 500 and the 29.4% gain in the NASDAQ. Sector multiples are also higher than they were in the year-ago period. The sector revenue multiple increased from 0.6x to 0.7x, while the sector EBITDA multiple rose from 7.4x to 9.2x.
The FOCUS Carrier-Focused Telecom Technology Index (CFTTI) continued its trend of strong gains with a 7.2% increase in our fall reporting period. While strong, the gain still lagged the broader indices as the S&P 500 was up 7.6% and the NASDAQ was up 11.0% over the same time frame.The CFTTI also turned in an impressive 12-month gain of 28.9%. Even so, the sector still came in slightly behind both the 29.2% gain in the S&P 500 and the 29.6% gain in the NASDAQ. Sector multiples continued their upward trend and closed out the period at 2.8x revenue and 13.3x EBITDA. These compare very favorably to year-ago multiples of 2.3x revenue and 11.5x EBITDA.
The FOCUS Enterprise-Focused Telecom Technology Index (EFTTI) delivered a strong return of 12.6% over these past three months. This outperformed both the S&P 500 and the NASDAQ, each of which gained only 5.1%. For the past 12-months, the sector delivered very similar returns to the broader indices. The 34.8% year-over-year return in the EFTTI is slightly above the 34.5% gain in the S&P 500, but slightly lower than the 37.4% return of the NASDAQ. Sector multiples are up considerably compared to this same time last year. The sector revenue multiple increased from 5.3x to 7.0x, while the sector EBITDA multiple increased from 20.7x to 27.4x.
The FOCUS Communications Service Provider Index (CSPI) was barely in the black for this current period with a three-month gain of 1.0%.This lagged both the 8.2% gain in the S&P 500 and the 9.5% gain in the NASDAQ over the same time frame by a wide margin.The situation is similar for the full year period as the CSPI’s increase of 16.5% represents less than half of the annual gains of the S&P 500 (up 38.6%) and the NASDAQ (up 44.2%). Sector multiples are higher than at this same time last year and closed out the period at 3.1x revenue and 8.7x EBITDA. Year-ago multiples were only 2.7x revenue and 7.8x EBITDA.
Once again, the FOCUS Telecom Business Services Index (TBSI) climbed higher, gaining 3.5% over the past three months. This marks the fifth straight period with a positive return for the sector. However, the TBSI did lag
the broader indices as the S&P 500 was up 8.2% and the NASDAQ was up 9.5% over the same time period. When looked at over the past 12 months, the sector’s return compares more favorably to the overall market. The 43.3% year-over-year gain in the TBSI outperforms the 38.6% gain in the S&P 500 and falls just shy of the 44.2% gain in the NASDAQ. Sector multiples are also higher than at this same time last year and closed out the period at 0.7x revenue and 9.6x EBITDA. This compares to year-ago multiples of 0.6x revenue and 7.4x EBITDA.
The FOCUS Carrier-Focused Telecom Technology Index (CFTTI) enjoyed yet another strong reporting period with a three-month gain of 13.1%. Not only was this gain impressive in absolute terms, but it handily outperformed both the 10.3% gain in the S&P 500 and the 4.2% gain in the NASDAQ over the same time period.The CFTTI still lags the broader indices for the full year period as its 18.6% gain in the last 12-months compares unfavorably to both the 38.1% gain in the S&P 500 and the 44.9% gain in the NASDAQ. Sector multiples ended the period at 2.6x revenue and 12.8x EBITDA. Both of these are higher than year-ago multiples of 2.4x revenue and 11.7x EBITDA.
The M&A market for companies in the Salesforce Partners program is reaching a critical inflection point. Competition is growing more intense, as the number of available firms shrinks, raising already-high valuations for those that remain independent. At the same time, proposed capital gains tax hikes make it imperative for potential sellers to consider doing deals as soon as possible.
