Analysis of Medallia’s Acquisition

The global customer experience management (CXM) software market is expected to grow at 17.5% CAGR to reach $27.1 billion by 2028. Medallia (NYSE: MDLA), a leading player in the market, recently announced its plans to go back to being a privately held organization.

Medallia’s Financials

Revenues for the first quarter grew 17% to $131.4 million, ahead of the market’s forecast of $127.39 million. Adjusted net loss of $12.1 million or $0.08 per share was worse than the market’s forecast of a loss of $0.07 per share for the quarter.

By segment, revenues from subscription services grew 19% to $106.1 million and revenues from professional services grew from $23.7 million last year to $25.3 million.

It expects to end the second quarter with revenues of $137-$139 million and revenues of $467-$471 million for the year. The Street was looking for revenues of $135.28 million for the quarter and $564.6 million for the year.

Medallia’s Partnership and Acquisition

Recently, Medallia announced its partnership with the North American motorcycle road racing series, MotoAmerica. The partnership will allow Medallia to integrate Quickstart Solutions with MotoAmerica to capture feedback from fans, employees, and racers through video, audio, and text. The solution will immediately capture, analyze, and report on the customer, employee, and racer experiences, allowing the creation of real-time decisions and improvements.

But the big news was Medallia’s acquisition by Chicago-based private equity firm Thoma Bravo for an estimated $6.4 billion. Medallia had gone public in 2019, and this acquisition will make it a private firm again. Thoma Bravo will be able to share its operating capabilities, capital support, and sector expertise to help drive innovation within Medallia. Thoma Bravo is known for its deep portfolio of technology and software firms. Earlier this year, it had acquired Proofpoint and Stamps.com. Medallia believes that the acquisition will allow it to use the additional resources and leverage additional flexibility to expand its leadership and drive customer impact.

The CX market has been on a growth spree with significant enterprise transactions. Earlier this year, Sprinklr announced its IPO at a valuation of $4.74 billion. Medallia’s biggest competitor remains Qualtrics, which had gone public earlier this year, and last month announced a $1.1 billion acquisition of omnichannel conversational analytics provider Clarabridge. Qualtrics itself was acquired by SAP and then spun out, before it went public as an independent and public company this year.

Medallia’s stock is currently trading at $33.58 with a market capitalization of $5.38 billion. It was trading at a 52-week high of $48.28 in February. The stock has recovered from the 52-week low of $23.58 if had fallen to in May.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.