UiPath was a startup darling with a $35B valuation, but the public markets proved rougher until the company diversified its product line.
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Back in early 2021, it seemed everything was going right for UiPath. At a time when there were a number of high-flying enterprise startups, UiPath was at the top of the heap when it raised $750 million at a $35 billion valuation. In hindsight it was an outrageous overreach, but it felt pretty good at the time.
The company would go public, riding the wave of that gaudy valuation, and while it started strong in the public markets, it would fall to earth over the following year as the markets began to cool and investors started judging SaaS companies much more harshly. With a plunging stock price a year after going public, it was time to make a bold move.
That came when UiPath hired enterprise veteran Rob Enslin as co-CEO in 2022. He had spent 27 years at SAP and a couple of more at Google Cloud, and he had the kind of enterprise management experience that the company required to pull itself out of the doldrums it found itself in.
It’s important to understand that up until Enslin came along, the company was mostly all-in on robotic process automation, or RPA, a way of automating mundane legacy processes by recording how a human does it and turning it into a digital process. But it turns out that RPA was a pretty small market, something that co-founder and CEO Daniel Dines recognized even before he hired Enslin.
Dines had begun looking at broadening the company’s focus with some small strategic acquisitions as early as 2019 and 2020 while the company was private, but it was up to Enslin to really implement a strategy to diversify the company.
He went to work reorganizing the company’s structure, sales motion and product focus. He took Dines’ original ideas and began to shift the company toward an automation platform approach that would allow his sales team to sell different products to customers instead of just a single RPA product, which came inherently with limitations.
Initially, the market wasn’t kind to the slowing growth that came with those changes. But over the last year, the stock has started to come back.
The transition
Even though some of the pieces were in place when Enslin arrived, he still had to shift how the company sold those pieces. Wall Street had already been changing how it values technology companies, even before he arrived.
“I think there was a reassessment of how investors were thinking about the technology, and they started imposing more fundamental rules about cost structures,” Maureen Fleming, an analyst at IDC who covers UiPath, told TechCrunch.
This resulted in investors rethinking the value of companies like UiPath, and the $35 billion private valuation didn’t really fit that new vision. “So that created a forcing function to put some discipline into running operations,” she said. That in turn gave Enslin the freedom to make some changes.
In 2022, he met with investors and laid out his plans to take the pieces he had and create a platform with three main areas: discover, automate and operate. “We had all the investors in front of us, and we laid out very clearly what our focus was going to be, and our focus was largely that customers needed more than RPA. They needed a platform, and we believe we had a platform,” Enslin told TechCrunch.
As part of that transition, there was also a massive go-to-market transformation where the company began to focus on expansion in large accounts. “We made certain that we went deep inside accounts, building great relationships, making certain we acquired customers that have the propensity to expand and to utilize automation in their business,” he said.
The company also started partnering with large organizations like Deloitte and Enslin’s former company SAP. As a systems integrator, Deloitte could help sell and implement UiPath product. In some ways, SAP was a rival, but in other ways it was a natural partner because of the amount of automation required to implement complex solutions like SAP.
By last year, the company also began showcasing its approach to generative AI, which was turning the automation market on its head. Enslin said the company had existing relationships with OpenAI and it quietly developed a product, which it showed to investors and customers.
This overall shift in approach got the attention of investors, who prefer a multi-product platform play to a single product, said Jake Roberge, an analyst at William Blair. “Over the last three or four years, they’ve started to gain a lot of traction with document understanding, process mining, task mining, and test suite so they now have four or five products that have gained real traction and real customer testimonials. And investors always reward that,” he said.
The proof is in the stock price
UiPath priced its IPO at $56 per share in mid-2021, earning it a valuation near to its pre-IPO price. But as its final private-market investors paid $62.28 per share for its equity before it went public, it had ground to make up. Thankfully for those backers, the company’s stock price shot higher, quickly rising to around $80 that year.
Then a long, slow and painful decline came into effect. By late 2022 UiPath was worth just over $10 per share, making it a poster-child for the comedown of post-2021 enthusiasm.
Those lows did not last too long, with UiPath’s stock recovering to more than $18 per share in 2023 before it reported its third-quarter results. Those figures were well-received by Wall Street, immediately bolstering the value of UiPath to $25 per share, where it has largely stayed since. Summing, the company has lost value from its IPO price and all-time highs, but has clawed its way back from its lows all the same.
How much of the company’s valuation recovery can we tie to its updated strategy and AI products? Enslin joined in April of 2022, before the company’s share price bottomed out later that year. 2022 was also the year in which growth rates at UiPath reached their nadir.
The company’s fiscal 2022 covers from January 31, 2021, through January 31, 2022. Its fiscal 2023 then covers all of calendar 2022, and its fiscal 2024 brings us to its most recent earnings report, which covers the three months concluding October 31, 2023.
Here are UiPath’s historical quarterly growth rates, and the pace of its ARR expansion from the same time periods. To make the data simpler, we’ve added calendar years to the fiscal rundown:
[~Calendar 2021]
Fiscal Q1 2022 revenue growth rate: 65% (ARR growth: 64%)
Fiscal Q2 2022 revenue growth rate: 40% (ARR growth: 60%)
Fiscal Q3 2022 revenue growth rate: 50% (ARR growth: 58%)
Fiscal Q4 2022 revenue growth rate: 39% (ARR growth 59%)
[~ Calendar 2022]
Fiscal Q1 2023 revenue growth rate: 32% (ARR growth: 50%)
Fiscal Q2 2023 revenue growth rate: 24% (ARR growth: 44%)
Fiscal Q3 2023 revenue growth rate: 19% (ARR growth: 36%)
Fiscal Q4 2023 revenue growth rate: 7% (ARR growth: 30%)
[~Calendar 2023]
Fiscal Q1 2024 revenue growth: 18% (ARR growth: 28%)
Fiscal Q2 2024 revenue growth: 19% (ARR growth: 25%)
Fiscal Q3 2024 revenue growth: 24% (ARR growth: 24%)
Enslin joined during the first quarter of UiPath’s fiscal 2023. The company’s growth rates had already slowed to the point that they were down 50% from the year-ago period (from 65% to 32%), a percentage that would rise to a roughly 82% decline in growth (from 39% to 7%) in the final quarter of UiPath’s fiscal 2023.
That’s the bad news. The good news is that since the start of UiPath’s fiscal 2024 — the three months ending April 30, 2023 — its growth rates have not only bounced back to double-digits, but have posted consecutive quarters of accelerating growth.
Can UiPath keep accelerating? When the company details the final quarter of its fiscal 2024 on March 13, we’ll get more data, but UiPath guided for 23.5% to 25.1% revenue growth and ARR growth of 20.4% to 20.9% in its quarter ending January 31, 2024. While we might anticipate another quarter’s revenue growth acceleration, it doesn’t appear that the company expects that its ARR will expand from the 24% it posted in its most recently reported quarter.
The arrival of Enslin did not instantly bolster UiPath’s growth rate, but after a few quarters it did turn the corner and embark on a path of faster revenue growth. That’s as clear an endorsement of a new strategy as we can infer from public numbers and a company’s internal actions, which are always occluded from our sight.
How much of its recent growth gains were born from operational shifts and what portion is attributable to newer AI-based revenues is not clear, but one signal that we did note in its third quarter fiscal 2024 data (the three months ending October 31, 2023) is that its net retention was 121%. That’s far and above what we have seen recently from many software companies. And it’s largely flat from its year-ago results, which, given how the tech market has evolved from October 2022 to October 2023, frankly feels impressive.
Business results are rarely single-factorial, so from where we sit, both an updated strategy and having an AI-ready company have helped UiPath recover its swagger. Now the question for the company is how much — if any — acceleration is left in its tanks. Even if the answer is zero, UiPath with ARR about to reach $1.5 billion and growth rates of around 25% is hardly a bad place to wind up. Hell, back in 2021 that would have been what, $100 billion?
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