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$PATH earnings findings
So looking at the earnings numbers and earnings call from $PATH here are the things I found interesting:
- The results for Q4 were remarkable. ARR grew 72% YoY, dollar based net retention rate was 145% and total customers spending over $1M in annual ARR was up 78%.
- Obviously, the stock fell today by 25% on the back of worse than expected guidance for Q1 2022. While many people stated the reason for the lower than expected guidance was because of tighter competition from companies like $MSFT and $NOW management on the earnings call dismissed that option:
"We are not seeing really any increase in the competition. On the contrary, we are seeing less competitive pressure in the deals. We are -- so we can comment if you are interested on various major players that we are seeing in the business. And in terms of the -- our traditional specialized competitors, we are really seeing less and less of them. We are replacing Blue Prism and Automation anywhere in many customers. And speaking about the new entrants like Microsoft and ServiceNow, we are -- we really -- we are not seeing them that much. I can comment on both specifically, if you are interested.
And then just on the numbers basis, I think it's really important. We see -- when you look at our win rates, we continue to look and analyze win rates between where Microsoft and where some of these large players are playing and where they're not. We don't see them a lot. But even when we do, our win rate has no difference compared to where they are not playing. So we're really -- the trend of continuing to feel us is the dominant player in the industry. Right now, that is continuing from the data that I see and that we see as a team."
- The reason for the lower guidance is because of headwinds caused by the war and the freezing of clients in Ukraine and Russian and Forex-related headwinds because of the war. Management stated the Russian revenue loss in the effect of 15M and FX headwind in the range of 20M-25M. According to the call, another headwind for the short-term revenue impact is the continued transition of clients from on-premise to cloud, which affected revenue expectations by -4%.
- What was surprising to me, given the stock price reaction, is that the guidance for 2023 still expects ARR revenue growth in the range of 30.8% (without the Russian headwind, it would be around 35%). So the company is still growing at a high level.
- I don't own the company yet, but at these valuation levels, after the dust settles, I might start a position as I like and know the RPA industry very well, given that I also founded a startup that is directly linked to the fast growing RPA industry.
The key thing for $PATH, in my view, is how they compete with $MSFT and that they still keep a dominant position. Watching Google trends and recent job listings, it seems like $MSFT's RPA offering is catching up to $PATH but seeing management today receiving a point-blank question regarding this competition and answering the way they did gives me more confidence in the company and the stickiness of the platform.
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