Automation software company UiPath (NYSE:PATH) reported Q3 FY2023 results that beat analyst expectations, with revenue up 18.9% year on year to $262.7 million. The company expects that next quarter's revenue would be around $278 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. UiPath made a GAAP loss of $57.7 million, improving on its loss of $122.7 million, in the same quarter last year.
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UiPath (PATH) Q3 FY2023 Highlights:
- Revenue: $262.7 million vs analyst estimates of $255.9 million (2.65% beat)
- EPS (non-GAAP): $0.05 vs analyst estimates of -$0.01 ($0.06 beat)
- Revenue guidance for Q4 2023 is $278 million at the midpoint, below analyst estimates of $279.3 million
- Free cash flow was negative $32.6 million, compared to negative free cash flow of $30.3 million in previous quarter
- Gross Margin (GAAP): 83.7%, up from 80.4% same quarter last year
“We are pleased with our third quarter fiscal 2023 results as ARR grew 36 percent year-over-year and we delivered meaningful non-GAAP operating margin expansion,” said Rob Enslin, UiPath Co-Chief Executive Officer.
Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE:PATH) makes software that helps companies automate repetitive computer tasks.
The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.
As you can see below, UiPath's revenue growth has been impressive over the last two years, growing from quarterly revenue of $147.2 million in Q3 FY2021, to $262.7 million.
This quarter, UiPath's quarterly revenue was once again up 18.9% year on year. On top of that, revenue increased $20.5 million quarter on quarter, a strong improvement on the $2.84 million decrease in Q2 2023, and a sign of re-acceleration of growth, which is very nice to see indeed.
UiPath is guiding for revenue to decline next quarter 4.03% year on year to $278 million, a further deceleration on the 39.3% year-over-year decrease in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 9.44% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. UiPath's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 83.7% in Q3.
That means that for every $1 in revenue the company had $0.83 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a great gross margin, that allows companies like UiPath to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.
Key Takeaways from UiPath's Q3 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on UiPath’s balance sheet, but we note that with a market capitalization of $6.85 billion and more than $1.67 billion in cash, the company has the capacity to continue to prioritise growth over profitability.
It was good to see UiPath improve their gross margin this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, revenue guidance for the next quarter slightly missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 6.72% on the results and currently trades at $13.8 per share.
Should you invest in UiPath right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.