Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Qualtrics International / Equity Capital Markets

<ul>
<li>Our base case EV for Qualtrics is US$5.2 billion. This is derived from our estimated sales of US$401.4 million in 2018 using an EV/Sales multiple of 12.9x, which is 30% premium to the average EV/Sales multiple of its peers. Our base case implied market cap for the company is US$5.7 billion adjusting for net cash. Our base case implied IPO price is US$26.50, which is 26% higher than the high end of the IPO price range of US$21. Therefore, we are positive on the Qualtrics IPO and we believe it provides an attractive upside. </li>
<li>We forecast Qualtrics to generate sales of US$401.4 million in 2018 (up 38.5% YoY) and US$541.8 million in 2019 (up 35% YoY). We expect the company's strong sales growth to be led by its subscription services. In 2018, we estimate that the subscription services represent 74.3% of total sales, followed by research on demand (17.5%), and professional services &amp; others (8.3%). </li>
<li>Qualtrics is expected to start trading next week in the US. Similar to other recent IT stocks in the US such as <a href="https://www.smartkarma.com/entities/27427" target="_blank" data-smartkarma-citation="entities:27427:1">Eventbrite Inc (EB US)</a>, <a href="https://www.smartkarma.com/entities/27526" target="_blank" data-smartkarma-citation="entities:27526:1">Elastic NV (ESTC US)</a>, and <a href="https://www.smartkarma.com/entities/27465" target="_blank" data-smartkarma-citation="entities:27465:1">Upwork (UPWK US)</a>, we expect a nice pop to Qualtrics' share price in the first day of trading.</li>
</ul>


Our base case EV for Qualtrics is US$5.2 billion. This is derived from our estimated sales of US$401.4 million in 2018 using an EV/Sales multiple of 12.9x, which is 30% premium to the average EV/Sales multiple of its peers. Our base case implied market cap for the company is US$5.7 billion adjusting for net cash. Our base case implied IPO price is US$26.50, which is 26% higher than the high end of the IPO price range of US$21. Therefore, we are positive on the Qualtrics IPO and we believe it provides an attractive upside. 
We forecast Qualtrics to generate sales of US$401.4 million in 2018 (up 38.5% YoY) and US$541.8 million in 2019 (up 35% YoY). We expect the company's strong sales growth to be led by its subscription services. In 2018, we estimate that the subscription services represent 74.3% of total sales, followed by research on demand (17.5%), and professional services &amp; others (8.3%). 
Qualtrics is expected to start trading next week in the US. Similar to other recent IT stocks in the US such as Eventbrite Inc (EB US), Elastic NV (ESTC US), and Upwork (UPWK US), we expect a nice pop to Qualtrics' share price in the first day of trading.


Qualtrics IPO Preview: Valuation Analysis

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<li>
<strong>Headquartered in Austin, Texas, <a href="https://www.smartkarma.com/entities/15648" target="_blank" data-smartkarma-citation="entities:15648:1">Solarwinds Inc (SWI US)</a> is a leading global provider of IT infrastructure management software systems. </strong>The company is getting ready for an IPO in the NASDAQ exchange this week with a price of US$17 to US$19 per share. At the mid-point of the IPO price range (US$18 per share), the company's market cap would be US$5.4 billion, and would raise about US$756 million. </li>
<li>SolarWinds first went public in 2009. In February 2016, the company was acquired by private equity firms Silver Lake and Thoma Bravo for US$4.5 billion in a leveraged buyout. Both Silver Lake and Thomas Bravo are highly reputable private equity firms and these stakeholders should be mostly positive for the SolarWinds IPO.</li>
<li>One of the company's key strategies is to target focus on the technology professionals. According to the company, <em>"it does not have an outside sales force or professional services organization. It does not wine and dine the C-suite. It does not sponsor golf tournaments or buy Super Bowl ads." </em>Rather, the company markets and sells its products directly to the IT professionals, including network and systems engineers, database administrators, and managed service providers (MSPs).  </li>
<li>The company's major competitors include <a href="https://www.smartkarma.com/entities/15269" target="_blank" data-smartkarma-citation="entities:15269:1">Netscout Systems (NTCT US)</a>, <a href="https://www.smartkarma.com/entities/1064" target="_blank" data-smartkarma-citation="entities:1064:1">Intl Business Machines (IBM US)</a>, MicroFocus (MFGP US), CA Technologies (CA US), BMC Software, Nagios, Manage Engine, ConnectWise, Continuum, Datto, and Kaseya. This remains a fragmented industry ripe for consolidation. In terms of comparable companies, <a href="https://www.smartkarma.com/entities/15269" target="_blank" data-smartkarma-citation="entities:15269:1">Netscout Systems (NTCT US)</a> and CA Technologies (CA US) appear to be most comparable. Investors are also likely to take into consideration the recent acquisition of BMC Software by KKR. In addition, the recent software IPOs in 2018 including <a href="https://www.smartkarma.com/entities/27117" target="_blank" data-smartkarma-citation="entities:27117:1">Zuora Inc (ZUO US)</a>, <a href="https://www.smartkarma.com/entities/27060" target="_blank" data-smartkarma-citation="entities:27060:1">DocuSign Inc (DOCU US)</a>, and <a href="https://www.smartkarma.com/entities/27115" target="_blank" data-smartkarma-citation="entities:27115:1">Smartsheet Inc (SMAR US)</a> are likely be used as comparable companies for SolarWinds. </li>
</ul>



Headquartered in Austin, Texas, Solarwinds Inc (SWI US) is a leading global provider of IT infrastructure management software systems. The company is getting ready for an IPO in the NASDAQ exchange this week with a price of US$17 to US$19 per share. At the mid-point of the IPO price range (US$18 per share), the company's market cap would be US$5.4 billion, and would raise about US$756 million. 
SolarWinds first went public in 2009. In February 2016, the company was acquired by private equity firms Silver Lake and Thoma Bravo for US$4.5 billion in a leveraged buyout. Both Silver Lake and Thomas Bravo are highly reputable private equity firms and these stakeholders should be mostly positive for the SolarWinds IPO.
One of the company's key strategies is to target focus on the technology professionals. According to the company, "it does not have an outside sales force or professional services organization. It does not wine and dine the C-suite. It does not sponsor golf tournaments or buy Super Bowl ads." Rather, the company markets and sells its products directly to the IT professionals, including network and systems engineers, database administrators, and managed service providers (MSPs).  
The company's major competitors include Netscout Systems (NTCT US), Intl Business Machines (IBM US), MicroFocus (MFGP US), CA Technologies (CA US), BMC Software, Nagios, Manage Engine, ConnectWise, Continuum, Datto, and Kaseya. This remains a fragmented industry ripe for consolidation. In terms of comparable companies, Netscout Systems (NTCT US) and CA Technologies (CA US) appear to be most comparable. Investors are also likely to take into consideration the recent acquisition of BMC Software by KKR. In addition, the recent software IPOs in 2018 including Zuora Inc (ZUO US), DocuSign Inc (DOCU US), and Smartsheet Inc (SMAR US) are likely be used as comparable companies for SolarWinds. 


SolarWinds Corp IPO Preview (Part 1) - "Make IT Look Easy"

United States

DocuSign, Inc. provides electronic signature solutions. The Company offers platform that enables businesses of all sizes to digitally prepare, sign, act on, and manage agreements. DocuSign serves mortgage, non-profit, government, real estate, insurance, technology, and healthcare industries worldwide.

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DocuSign (DOCU US)

Qualtrics IPO Preview: Valuation Analysis

Our base case EV for Qualtrics is US$5.2 billion. This is derived from our estimated sales of US$401.4 million in 2018 using an EV/Sales multiple...

Douglas Kim

SolarWinds Corp IPO Preview (Part 1) - "Make IT Look Easy"

Headquartered in Austin, Texas, Solarwinds Inc (SWI US) is a leading global provider of IT infrastructure management software systems. The...

Douglas Kim

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52-week Range

Market Cap (USDm)

P/E

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