SAP spinout Qualtrics to go public next week

Qualtrics, which provides “experience management” software, was acquired by SAP for $8 billion in 2018, after abandoning a previous plan for an initial offering.

• Founded: 2002
• Co-headquartered in Seattle, Washington and Provo, Utah 

Now a wholly owned unit of German software giant SAP (ticker: SAP), Qualtrics is scheduled to go public next week. On Tuesday, the company raised the expected price range for its initial public offering to between $22 and $26 a share, up from a previous forecast of $20 to $24.

The company will sell 49.2 million class A shares in the offering, while SAP will hold on to all 423.2 million of the company’ supervoting class B shares. In total, there will be about 510 million shares outstanding, assuming the exercise of the “green shoe” overallotment option, which would indicate a valuation at the top of the range of more than $13 billion.

Qualtrics, which provides “experience management” software, was acquired by SAP for $8 billion in 2018, after abandoning a previous plan for an initial offering.

The company said in the filing that it had sales in the rolling 12 months ended Sept. 30 of $723 million, up 36% from a year ago. For the nine months through the same date, revenue was $550 million, up 31%. The company had a net loss of $258 million in the nine-month period.

Investors have recently gobbled up shares of newly public enterprise software companies—think of stocks like Snowflake (SNOW), C3.ai (AI), and Palantir Technologies (PLTR). Qualtrics isn’t growing nearly as fast as Snowflake, or even Palantir, and the company is losing gobs.

Assume Qualtrics can grow the top line another 30% next year, and you get a figure in the $940 million range. If you assume the stock prices at the top of the range and if the green shoe is exercised, the valuation would be around 14 times revenue, which is pricier than legacy enterprise software companies, but a lot less than the likes of Snowflake or C3.ai. Current parent SAP trades for around five times forward revenues, for instance.

Morgan Stanley and J.P. Morgan are co-managing the underwriting group. Qualtrics expects to trade on Nasdaq market under the ticker XM.