UiPath Stock Has Strong Debut, Stock Soars 25% From IPO Price

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In one of the biggest software initial public offerings in months,

UiPath

 went public Wednesday in a deal that values the company at more than $35 billion.

UiPath (ticker: PATH) is one of a handful of startups focused on “robotic process automation,” software that uses artificial intelligence techniques to simplify repetitive tasks. The software has applications across many industries, including financial services, health care, government, retailing, insurance and telecommunications. Other players include the startups Automation Anywhere and Blue Prism;

Microsoft

(MSFT) has also been dabbling in the RPA market.

In the offering, UiPath sold 23.9 million shares at $56 each, raising about $1.3 billion before expenses. The deal priced above the projected range of $52 to $54 a share, opened for trading at $65.50, and as of midday Wednesday was trading for about $70. With about 519 million shares outstanding, the company now sports a market cap of about $36 billion, or about $38 billion if you include in-the-money options and restricted stock units. That puts the valuation a little ahead of its last venture round, which valued the company at $35 billion.

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UiPath trades on the New York Stock Exchange under the symbol PATH. Morgan Stanley and J.P. Morgan led the underwriting group for the offering. The largest investors after the offering include the venture-capital firms Accel, with about 24.1% of the company’s class A shares, EarlyBird Capital with 9.5%, and CapitalG with 6.9%. Founder and CEO Daniel Dines has 6.5% of the class A shares and 100% of the supervoting class B shares, with 35 votes per share, giving him 88.1% voting power after the offering.

UiPath had revenue in the fiscal year ended January 2021 of $607.6 million, up about 81% from the previous year. Net loss for the year was $94.7 million, down from a net loss of $517.1 million the previous year.

In an interview with Barron’s, UiPath Chief Financial Officer Ashim Gupta, a former

General Electric (GE)

executive, said the company’s mission is to “accelerate human creativity and human achievement…by taking manual tasks and automating them.” The focus is on taking repetitive tasks and speeding up and simplifying them. Gupta notes that the company in the IPO filing said that its addressable market is more than $60 billion—but he adds that internally the company thinks that number is understated, and that their potential is “every company and process, every department and employee…we’re at the center of digital transformation.”

Gupta notes that the company has over 7,900 customers, including 60% of the Global 500. He thinks the growth opportunity will last for a long time to come. “We feel good about the pipeline we’re building,” he says. “Customers are seeing high ROI. We’ve got durable growth, and turned cash flow positive last year.” He adds that the company should produce long-term operating margins “similar to best-in-class [software-as-a-service] companies.” 

Gupta notes that the UiPath platform offers both powerful tools for professional software developers, and a more simplified option for “citizen developers” that allows people who have process-oriented jobs to develop their own automations. He says that 800,000 people have taken a free online training course—with the ability to build basic automations after just four hours of class.

Founded in Bucharest, Romania, in 2005, the company is now based in New York City. Gupta notes that some of UiPath’s earliest customers were in Europe and Japan, and that the business is now split roughly evenly in thirds among the U.S., Europe, and Asia.

The company generates revenue through a subscription model, mostly through one-year licensing agreements. Gupta notes that renewal rates are high, with a gross retention rate above 97%. While likely to be lumped in with the cloud-software category, the company delivers its software in multiple ways, including a SaaS platform for smaller companies, while larger companies can choose to run the software on their own platforms, either in the cloud or in data centers.

The strong reception for the stock has lifted UiPath to an impressive valuation—if you assume the company can grow revenue by 75% this year, that would increase the total to a little over $1 billion—and that would suggest a current valuation of more than 36 times current-year revenue, about in line with Snowflake (SNOW), one of the most highly valued cloud-software companies.

Write to Eric J. Savitz at eric.savitz@barrons.com