UiPath: Benchmarking the S-1 Data

Recently UiPath filed their S1 statement. A S-1 is a document companies file with the SEC in preparation for listing their shares on an exchange like the NYSE or NASDAQ. The document contains a plethora of information on the company including a general overview, up to date financials, risk factors to the business, cap table highlights and much more. The purpose of the detailed information is to help investors (both institutional and retail) make informed investment decisions. There’s a lot of info to digest, so in the sections below I’ll try and pull out the relevant financial information and benchmark it against current cloud businesses. As far as an expected timeline - typically companies launch their roadshow ~3 weeks after filing their initial S-1 (the roadshow launches with an updated S-1 that contains a price range). After the roadshow launch there’s typically ~2 weeks before the stock starts trading. So we’re looking at roughly 5 weeks before any retail investor can buy the stock.

UiPath Overview

From the S1 - “The modern enterprise is complex as employees must navigate an ever-increasing number of systems and applications to perform their day-to-day work. This dynamic forces workers to constantly execute manual, time-consuming, and repetitive tasks to get their work done. The friction faced by workers often results in lost productivity that can have a direct impact on a company’s bottom line. Traditional automation solutions intended to reduce this friction have generally been designed to be used by developers and engineers, rather than the employees directly involved in executing the actual work being automated. As a result, employees are limited by the lack of flexibility of these traditional automation technologies causing employee productivity, innovation, and satisfaction to suffer.”

“Our platform is designed to transform the way humans work. We provide our customers with a robust set of capabilities to discover automation opportunities and build, manage, run, engage, measure, and govern automations across departments within an organization. Our platform leverages the power of artificial intelligence, or AI, based computer vision to enable our software robots to perform a vast array of actions as a human would when executing business processes. These actions include, but are not limited to, logging into applications, extracting information from documents, moving folders, filling in forms, and updating information fields and databases. Our robots’ ability to learn from and replicate workers’ steps in executing business processes drives continuous improvements in operational efficiencies and enables companies to deliver on key digital initiatives with greater speed, agility, and accuracy.”

Product Overview

From the S-1: “Our platform encapsulates seven modular product pillars that together address the automation lifecycle within an enterprise:

Discover. Our Discover products combine AI with desktop recording, back-end mining of both human activity and system logs, and intuitive visualization tools, enabling users to discover, analyze, and identify unique processes to automate in a centralized portal.

Build. Our Build products are low-code development environments with easy-to-use, drag-and-drop functionality that users in an organization can learn to use to create attended and unattended automations without any prior knowledge of coding.

Manage. The products in our Manage category offer centralized tools designed to securely and resiliently manage, test, and deploy automations and ML models across the entire enterprise, with seamless access, enterprise-grade security, and endless scalability of data.

Run. With our Run products, an enterprise can deploy our robots in highly immersive attended experiences or in standalone, unattended modes behind the scenes, and can leverage hundreds of native connectors built for commonly used line-of-business applications.

Engage. With our Engage products, there are multiple ways for users to remain connected and interact with robots, whether they are running in a data center, in the cloud, or right on their desktop. This capability allows our customers to manage long running processes that orchestrate work between robots and humans.

Measure. Our Measure products enable users to track, measure, and forecast the performance of automation in their enterprise.

Govern.We offer powerful, centralized governance capabilities designed to help businesses ensure compliance with business standards.”

Market Opportunity

From the S-1: “We are disrupting a large and fast-growing market. Our platform addresses the market for Intelligent Process Automation, which International Data Corporation, or IDC, estimated would have a value of $17 billion by the end of 2020 and is expected to grow at a four-year compound annual growth rate of approximately 16% to $30 billion by the end of 2024. However, we believe that this does not fully encompass the opportunity associated with our vision of the fully automated enterprise.

We estimate our current global market opportunity to be more than $60 billion, which we expect will grow as automation adoption increases and customers continue to further explore the use cases that our platform addresses. To estimate our total market opportunity, we identified the number of companies worldwide across all industries with at least 200 employees, based on certain independent industry data from the S&P Capital IQ database. We then segmented these companies into three categories based on total number of employees: companies with 200-4,999 employees, companies with 5,000-19,999 employees, and companies with 20,000 or more employees. We then multiplied the number of companies in each category by the 90th percentile of ARR per customer in each such cohort as of December 31, 2020, among customers with at least $10,000 in ARR, which we believe represents a customer that has broadly deployed our platform across the enterprise, and then summed the results from each category.”

Benchmark Data

The data shown below depicts how the [company] data compares to the operating metrics of current public SaaS businesses.

Last Twelve Months (LTM) Revenue

UiPath LTM revenue: $608M. This is on the larger end of IPOs, and above the median of all public cloud companies

LTM Revenue Growth

UiPath grew 81% over the last 12 months, making them one of the fastest growing cloud businesses

LTM GAAP Gross Margin

UiPath has exceptional gross margins of 89%

LTM GAAP Operating Margin

UiPath’s LTM GAAP operating margin was (18%)

Net Revenue Retention

This metric is calculated by taking the annual recurring revenue of a cohort of customers from 1 year ago, and comparing it to the current annual recurring revenue of that same set of customers (even if you experienced churn and that group of customers now only has 9, or anything <10).

UiPath’s net retention is best in class at 145%

Gross Margin Adjusted CAC Payback

(Previous Q S&M) / (Net New ARR x Gross Margin) x 12. This metric demonstrates how long it takes (in months) for a customer to pay back the cost at which it took to acquire them. In the chart below I’m taking the average of the 4 quarters leading up to IPO to normalize the business.

UiPath didn’t release quarterly financials in this S-1 so I can’t calculate their payback yet (I’ll update this post once a filing with quarterly numbers is published). Looking at the annual figures, I’d estimate the payback to be ~20 months. The one piece of data to call out here - UiPath does spent quite a bit of money on their S&M expense. Looking over the last 12 months, S&M as a % of revenue was 63%. This would rank right around the top 5 for all cloud companies.

UPDATE

UiPath released an updated S-1 with quarterly financials. Payback comes in ~22 months, right around the median:

Rule of 40

In the below chart I’m showing LTM revenue growth + LTM FCF margin. UiPath benchmarks quite well at 85%

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and all employers and their affiliated persons assume no liability for this information and no obligation to update the information or analysis contained herein in the future.