Qualtrics Targets $18 to $21 Price Range For Its IPO

Morning Markets: Qualtrics announced its IPO price range today. Let’s take a look.

When Qualtrics first filed to go public, we were impressed by its financials. To see a subscription software company generate as much cash and profit as Qualtrics while growing is rare. It stood out.

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Qualtrics is a SaaS company based in Provo, Utah, that uses survey tools to poll markets and employees. The firm raised $400 million across three rounds ($70 million, $150 million, and $180 million), from Accel, Sequoia, and Insight Venture Partners during its life as a private company.

The firm previously detailed its third-quarter results in a filing, so let’s quickly summarize those results and then figure out what its new, filing-sourced price range tell us.

Q3

In the third quarter, Qualtrics grew from its revenue from $97.1 million in the preceding quarter, to $105.4 million. That’s a gain of around 8.5 percent in a quarter, at Qualtric’s scale. But what was even more impressive for Qualtrics is that the company managed to post a profit greater than its sequentially-preceding quarter and its year-ago quarter at the same time.

In the third quarter of this year, Qualtrics wrung out $4.9 million in net income (measured using GAAP), up from $975,000 in the second quarter of 2018, or the $4.7 million it recorded in its year-ago Q3. It does seem, reading the company’s filing, that the third quarter is its most profitable, admittedly. But to see profit grow up in the same quarter that the firm added just over $7 million in new subscription revenue is good.

On the less-than-great side of things, Qualtrics has generated less net cash increases this year than in the same period of 2017. But, the firm has grown its operating cash flow from $36.1 million in the first nine months of 2017, to $52.5 million in the first three quarters of 2018.

Got all that? Let’s talk price.

Price, Valuation

So, what is that worth? According to Qualtrics, it intends to sell shares for as much as $21 (and as little as $18). Qualtrics is selling 20.5 million shares, and its underwriters can buy up to another 3.1 million, given the firm a possible haul of about 23.6 million shares.

At its maximum, listed price that would generate around $495 million in gross receipts for the firm. Its net would be less of course, but the figure tells us that the firm is looking to raise a lot of money. (Qualtrics currently has $137.7 million in cash and equivalents on-hand).

Now, Qualtrics will have just about 216 million (215.952 million, more precisely) shares outstanding after its offering, although I am not entirely clear if that figure includes the underwriter’s option. Regardless, at its range from $18 to $21 per share, Qualtrics would be worth around $3.9 billion to $4.5 billion.

Now at over $100 million in revenue per quarter, you can quickly gist out where the firm’s revenue multiple hovers.

This will be a fun one to watch.

Illustration: Li-Anne Dias