After an upward revision, UiPath priced its IPO last night at $56 per share, a few dollars above its raised target range. The above-range price meant that the unicorn put more capital into its books through its public offering.
For a company in a market as competitive as robotic process automation (RPA), the funds are welcome. In fact, RPA has been top of mind for startups and established companies alike over the last year or so. In that time frame, enterprise stalwarts like SAP, Microsoft, IBM and ServiceNow have been buying smaller RPA startups and building their own, all in an effort to muscle into an increasingly lucrative market.
In June 2019, Gartner reported that RPA was the fastest-growing area in enterprise software, and while the growth has slowed down since, the sector is still attracting attention. UIPath, which Gartner found was the market leader, has been riding that wave, and today’s capital influx should help the company maintain its market position.
It’s worth noting that when the company had its last private funding round in February, it brought home $750 million at an impressive valuation of $35 billion. But as TechCrunch noted over the course of its pivot to the public markets, that round valued the company above its final IPO price. As a result, this week’s $56-per-share public offer wound up being something of a modest down-round IPO to UiPath’s final private valuation.
Then, a broader set of public traders got hold of its stock and bid its shares higher. The former unicorn’s shares closed their first day’s trading at precisely $69, above the per-share price at which the company closed its final private round.
So despite a somewhat circuitous route, UiPath closed its first day as a public company worth more than it was in its Series F round — when it sold 12,043,202 shares at $62.27576 apiece, per SEC filings. More simply, UiPath closed today worth more per-share than it was in February.
How you might value the company, whether you prefer a simple or fully diluted share count, is somewhat immaterial at this juncture. UiPath had a good day.
While it’s hard to know what the company might do with the proceeds, chances are it will continue to try to expand its platform beyond pure RPA, which could become market-limited over time as companies look at other, more modern approaches to automation. By adding additional automation capabilities — organically or via acquisitions — the company can begin covering broader parts of its market.
TechCrunch spoke with UiPath CFO Ashim Gupta today, curious about the company’s choice of a traditional IPO, its general avoidance of adjusted metrics in its SEC filings, and the IPO market’s current temperature. The final question was on our minds, as some companies have pulled their public listings in the wake of a market described as “challenging.”
Why did UiPath not direct list after its huge February raise?
Gupta argued that UiPath is competing in a large, growing market. In his view, “playing offense” is key. So adding extra capital to its accounts in February made sense, as did adding even more with its IPO.
Gupta also explained that the traditional IPO allowed his company to court an investor set that it wanted to target. This is somewhat standard practice in which companies that are going public pursue long-term shareholders through a listing process. A direct listing, in which a company does not sell any primary shares through its flotation and thus doesn’t accrete new, large shareholders with a process that it can largely control, does not offer the same ability.
Raising privately and then pursuing a direct listing may be good for some companies, he said, but UiPath was happy with the choices it made.
Why the grown-up metrics?
While reading UiPath’s various S-1 filings, TechCrunch noted that the company eschewed sharing popular, if lax, profit metrics like the infamous EBITDA and the even-looser adjusted EBITDA. We were curious why it did so, aside from the fact that UiPath could detail its recent unadjusted profits in its final filings, a feat that most tech listings haven’t been able to match in recent quarters.
Gupta said his company focuses on two things: Annual recurring revenue (ARR) and free cash flow (FCF). Notably, those are both non-GAAP metrics, but they are clear enough that we don’t mind their use. The CFO stressed the importance of transparency during our call, which fit neatly into this point. By telling investors it is focused on ARR and FCF, UiPath can talk up its results in a SaaS-friendly fashion while still providing GAAP results and no other fluff.
We dig it.
Why go public when the market is a bit softer than it was?
Gupta said UiPath’s roadshow was successful, and its early, lower pricing interval helped it ensure that it could talk to as broad an investor set as possible. He also praised his company’s first-day trading performance, saying that it showed that UiPath had priced “aggressively.”
But why go out now, when the market is a bit weaker than it was a few months ago? In short, the company raised that $750 million round when the markets were attractive and it could add to its balance sheet. Then, looking ahead toward its public offering, it decided that the market for its debut was still good.
Sure, Gupta allowed, there have been some declines from the market’s February peak, but compared to prior moments in time, the market is still near all-time highs. So it made sense to go forward with its public offering regardless of some declines in the multiples of cloud companies.
Given where the company’s shares closed today after its first day’s trading, that’s hard to argue with.