IPOs 2021: Analysis of UiPath’s Cloud Elements Acquisition

According to a Forrester report, the Worldwide Intelligent Process Automation revenue is estimated to grow from $17 billion in 2020 to $30 billion by 2024. Earlier this summer, UiPath (NYSE: PATH), a key player in this market, went public.

UiPath’s Offerings

New York-based UiPath was set up by Daniel Dines and Marius Trica in 2005 out of an apartment in Bucharest, Romania as DeskOver. The founders believed that the traditional approach to process automation was time-consuming and required significant infrastructure, process change, and skilled developers. They wanted to come up with a new approach to automation that would make this process simpler. To help achieve this objective, for the next few years, UiPath continued to build automation scripts. In 2012, the idea of Robotic Process Automation (RPA) caught on. For the next few years, UiPath focused on its RPA technology, and by 2013, it had launched a desktop version and by 2015 an enterprise version. It also renamed itself as UiPath.

UiPath’s platform is designed to transform the way humans work. It provides its customers with a set of capabilities to discover automation opportunities and build, manage, run, engage, measure, and govern automation across departments within an organization. By leveraging the power of AI, it is able to create software robots that perform a vast array of actions within business processes. The process continuously improves by learning from and replicating workers’ steps, thus driving operational efficiencies. The simple solution enables employees to quickly build, maintain, and scale automation for both existing and new processes, all without substantial technical experience.

UiPath initially focused on the BPO industry and expanded its presence in India to help make India’s already comparatively cheaper BPO service even more productive and efficient. Since then, UiPath has entered into agreements with several BPO and consulting firms to offer automation services to its clients.

Today, UiPath believes that its market opportunity will grow to $60 billion in the next few years. It has built an ecosystem of over 4,000 GTM and technical partners who cater to over 8,500 customers. It is not the only player in the market and faces competition from the likes of Automation Anywhere, Blue Prism, and even Microsoft. But, according to a recent Gartner report, UiPath is a clear leader in this market.

UiPath’s Financials

UiPath has seen strong revenue growth over the past years. It generated revenues of $336.2 million in fiscal 2020, which grew to $607.6 million in fiscal 2021. Net loss during this period reduced from $519.9 million to $92.4 million. The company recently reported its second-quarter results where revenues grew 65% to $186.2 million. Annual Run-Rate Revenue (ARR) grew 64% to $652.6 million. It ended the quarter with a net loss of $1.11 per share compared with a net loss of $0.33 per share a year ago.

For the third quarter, UiPath forecast revenues of $180-$185 million. The market forecast revenues of $184.44 million.

UiPath’s Acquisition

Recently, UiPath announced the acquisition of Denver-based Cloud Elements. Founded in 2012 by Atul Barve, Gary Gaessler, Mark Geene, and Vineet Joshi, Cloud Elements is a developer of an API integration platform that integrates and manages digital products and applications. It has end-to-end features including data transformations, API provisioning, usage monitoring, events, and notifications that assist in tracking and troubleshooting, allowing developers to integrate several apps into multiple CRM and marketing automation platforms easily.

The acquisition will allow UiPath to offer both enterprise-grade UI and API-based automation capabilities on one platform, allowing customers to automate processes with the help of an optimal mix of UI and API-based automation. Prior to the acquisition, Cloud Elements raised $46.6 million in funding from investors including Rally Ventures, American Express Ventures, Upslope Ventures, Mercato Ventures, Grotech Ventures, and Harbert Growth Partners.

Its stock is currently trading at $64.92 with a market capitalization of $33.2 billion. It had climbed to a high of $90 soon after listing in April. UiPath had raised $1.3 billion from its IPO at a list price of $56. It was valued at $35 billion at the time of listing. Prior to listing, it had raised $2 billion in eight rounds of funding, with the most recent round being held in February. Its investors include Alkeon Capital, Tiger Global Management, Altimeter Capital, Sequoia Capital, Dragoneer Investment Group, IVP, Coatue, T. Rowe Price, and G Squared.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

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This segment is a part in the series : IPOs 2021