The company is said to be present in 170 countries. Thirdly, despite being a smaller player Blue Prism still boasts a cohort of attractive clients spanning all sectors from the National Health Service in the UK, financial services Banco Santander ( SAN) and BT. Secondly, recent results are being driven with operating costs falling - management may have been too eager to spend as opposed to assessing cost benefits stringently in the past which under private equity would have potential for significant overhaul. One is that the performance metrics of the business are strong, showing that the product itself is good and customers are satisfied - this is evident in a H1 FY1/2021 net retention ratio of 115% and annual recurring revenues (ARR) are growing at an attractive rate of 22% YoY. So what are the factors that would attract a buyout? We think these boil down to three areas.
#BLUE PRISM STOCK VALUATION SOFTWARE#
TPG Capital has experience from Domo ( DOMO), Box ( BOX) and Zscaler ( ZS), whilst Vista has in its portfolio Ping Identity ( PING) and its approach is to invest exclusively in enterprise software companies. Both firms have a solid track record as investment firms and if acquired Blue Prism is very likely to benefit from expertise in running a software business as well as enlarging its footprint in the all-important US market. The disclosure of undergoing discussions with TPG Capital and Vista Equity Partners has made a positive impact on the shares. Potentially private equity may have approached the company directly after seeing the shares perform poorly sensing an opportunity. Perhaps UiPath's deal in April 2021 placed a spanner in the scheduling and its subsequent performance may have spurred the company's advisors to look for alternatives. One question left unanswered is why the US listing option has not been executed. The end result is a company that is evidently much smaller than its key peer, performing to market expectation but with no real positive catalyst. H1 FY10/2021 results saw adjusted EBITDA significantly ahead of consensus (GBP8 million loss versus consensus GBP15 million loss) but there was no guidance revision. The second angle is that although Blue Prism is performing close to consensus sales growth expectations, there is not much in terms of upside surprise when it comes to guidance despite business conditions vastly improving post-pandemic. UiPath valuations remain very high, trading on FY1/2023 price to sales 24.7x on a robust but not eye-popping 33% YoY top-line growth consensus estimate.
UiPath's IPO in April 2021 was richly priced at $56 dollars a share and the shares have currently fallen below that level, indicating that the market's appetite for RPA software as an investment has waned. Firstly, Blue Prism's plans for a US listing has gone very quiet so any opportunity to make relative valuation comparisons with market leader UiPath ( PATH) became a moot point. Our bullish call has been wrong and stems from two key reasons in our view. Source: Company, Refinitiv, created by Karreta Advisors Our assessment We have been wrong on this stock, and want to reassess our investment thesis. Earlier in 2021 the company was investigating a US listing but it was confirmed in August 2021 that discussions are being held with TPG Capital and Vista Equity Partners regarding a possible takeover offer.
Backgroundįounded in 2001 Blue Prism is one of the pioneers of robotic process automation (RPA) software, with over 90% recurring revenues. On the basis that such a deal is probable, we reiterate our bullish stance. A US listing now looks off the cards but we believe the company would be an attractive asset for private equity funds.
Metamorworks/iStock via Getty Images Investment thesisīlue Prism ( OTCPK:BPRMF) is a relatively small player in enterprise software but its performance metrics point to a decent product with high customer satisfaction.
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