Project Alpha Intermediate Holding Inc. Ratings Affirmed On Recapitalization, Outlook Stable; New Term Loan Rated 'B-'
- In support of its contemplated recapitalization, business intelligence software provider Project Alpha Intermediate Holding Inc. (d/b/a Qlik) plans to issue about $1.7 billion of new debt, which will comprise a $1.1 billion add-on to its first-lien term loan and a $605 million second-lien term loan. The company also intends to upsize its revolving credit facility (RCF) by $100 million to $300 million.
- Sponsor Thoma Bravo is undertaking a minority recapitalization funded partially by the new debt. Thoma Bravo will remain the majority shareholder and is also making a new equity investment in the company, with plans to involve a consortium of additional investors
- Therefore, S&P Global Ratings affirmed its 'B' issuer credit rating on Qlik and its 'B' issue-level rating on the company's first-lien debt. At the same time, we assigned our 'B-' issue-level rating and '5' recovery rating to Qlik's new second-lien term loan.
- The stable outlook reflects our expectation that, despite its elevated interest expense and leverage burden, Qlik will maintain funds from operations (FFO) cash interest coverage in the mid-1x area and generate more than $100 million of unadjusted free operating cash flow (FOCF) in 2025.
NEW YORK (S&P Global Ratings) Nov. 12, 2024—S&P Global Ratings today took the rating actions listed above.
Qlik has continued to deliver on its cross-selling and cost-savings targets since its acquisition of Talend in May 2023. In the first three quarters of the company's fiscal year 2024 (Dec. 31, 2024), the company grew revenue by nearly 10% year-over-year on a constant-currency basis. Qlik's sales activity accelerated sequentially over the period, supported by cross-selling tailwinds, an increase in its subscription revenue, and a broader improvement in enterprise IT spending. The company's cross-selling activities over the period contributed to an about 1% expansion in its annual recurring revenue (ARR). Qlik also expanded its S&P Global Ratings-adjusted EBITDA margins to about 37% for the 12-months ended Sept. 30, 2024, on the realization of cost savings stemming from the actions it implemented since the close of the Talend acquisition. For fiscal year 2024, we expect Qlik will maintain its current performance trajectory and deliver S&P Global Ratings-adjusted EBITDA margins near 37%. We expect further improvements in the company's scale and profitability will strengthen its cash flow, enabling it to generate about $250 million of FOCF in fiscal year 2024.
The stable outlook reflects our expectation that, despite its elevated interest expense and leverage burden, Qlik will maintain FFO cash interest coverage in the mid-1x area and generate more than $100 million of unadjusted FOCF in 2025.
We could consider lowering our rating on Qlik if we believe it will sustain FFO cash interest coverage below the mid-1x area and generate less than $100 million of FOCF (inclusive of one-time integration or acquisition costs, debt-funded acquisitions, or shareholder returns). This could occur if the company faces disruptions to its business operations from its large cost-savings plan and weaker demand amid a tougher macroeconomic environment or rising competitive pressures.
We could raise our rating on Qlik if we believe it can sustain FFO cash interest coverage exceeding the mid-1x area and generate more than $200 million of FOCF. This could occur if the company achieves a greater-than-expected level of synergies and continues to benefit from stable demand for its data integration and analytics solutions.
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| Primary Credit Analyst: | Kevin Chen, New York +1 2124381045; kevin.chen2@spglobal.com |
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