In this breaking analysis, David Vellante, Co-CEO of SiliconANGLE Media, digs into robotic process automation leader UiPath to share his most current data and view of the company’s prospects, its performance relative to the competition, and the market overall.
According to Dave, UiPath has plenty of upside potential but will have to slog through its current challenges, including restructuring its go-to-market efforts, prioritizing investments, balancing growth with profitability, and dealing with a difficult macro environment. Here are a few insights from the analysis:
— While UiPath’s ARR has surpassed $1 billion for the first time in its history, it’s very rare to see a company’s growth rate dramatically accelerate when it reaches a significant size. Generally, as a company reaches critical mass, growth slows, and that’s what the data shows for UiPath.
— Despite strong 80%-plus gross margins, the unicorn remains unprofitable and free cash flow negative. New co-Chief Executive Rob Enslin has emphasized the focus on profitability.
— UiPath’s growth has slowed, and management has lowered guidance. The company has mentioned significant macro challenges, including currency fluctuations and weaker demand (especially in Europe and Asia-Pacific).
— There are foreign exchange issues. Unlike most high-flying tech companies from Silicon Valley, UiPath has a much larger proportion of business coming from locations outside the U.S. – around 50% of its revenue. Because it prices in local currencies, when you convert to appreciated dollars there are less of them and that weighs on revenue.
— UiPath has $1.6 billion in cash on the balance sheet and no debt, so we’re a long way from cash levels with its current $7 billion valuation. At the same time, the valuation range for this stock has been quite remarkable – from around $44 billion last May to $7 billion today – quite a swing.
— Despite its challenges, UiPath continues to get high marks from customers and analysts, and relative to peers, it maintains a leadership position in the ETR (Enterprise Technology Research) data set. The chart above shows Net Score or spending velocity on the vertical axis and Overlap or presence in the data set on the horizontal axis. Microsoft continues to have a big presence and somewhat skews the data. UiPath has maintained its lead relative to Automation Anywhere on the horizontal axis and remains ahead of the legacy pack of business process and other RPA vendors.
Conclusion
UiPath has rocketed to a leading position in the market. The slingshot effect of growing rapidly, going public and living under the scrutiny of the quarterly shot clock has forced the company to take a pause and reset expectations. At the same time, it has been executing on a broader vision to be the clear leader in enterprise automation. To do this, the company realized it needed new leadership, or at least an experienced co-pilot with strengths that complement Daniel Dines’ product depth.
UiPath has set a new course for its rocket ship. It has plenty of fuel in the form of a large customer base, relatively low churn, product leadership and a strong balance sheet. Its new co-CEO is a strong communicator who has set a definitive tone, underscoring the mandate for profitability while maintaining a growth trajectory. Although the macro environment is a concern, UiPath has enough runway to see itself through the choppiness.
Learn more about the prospects of UiPath ahead of Forward 5, UiPath’s customer conference in Las Vegas Sept. 27-29, from the full report.
