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UiPath (NYSE:PATH) Q1 Sales Beat Estimates, Stock Soars


Jabin Bastian /
2022/06/01 4:30 pm EDT
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Automation software company UiPath (NYSE:PATH) reported Q1 FY2023 results that beat analyst expectations, with revenue up 31.6% year on year to $245 million. The company expects that next quarter's revenue would be around $230 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. UiPath made a GAAP loss of $122.5 million, improving on its loss of $239.6 million, in the same quarter last year.

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UiPath (PATH) Q1 FY2023 Highlights:

  • Revenue: $245 million vs analyst estimates of $225.3 million (8.73% beat)
  • EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.06 (45.8% beat)
  • Revenue guidance for Q2 2023 is $230 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $1.08 billion at the midpoint
  • Free cash flow was negative $62.5 million, down from positive free cash flow of $9.78 million in previous quarter
  • Gross Margin (GAAP): 81.6%, up from 73.6% same quarter last year

“We are pleased to have exceeded first quarter guidance across all metrics with ARR of $977 million growing 50 percent year-over-year. I want to thank the UiPath team for their hard work and dedication to our customers in the midst of such turbulent times,” said Daniel Dines, UiPath Co-Founder and 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.

Sales Growth

As you can see below, UiPath's revenue growth has been impressive over the last year, growing from quarterly revenue of $186.2 million, to $245 million.

UiPath Total Revenue

And unsurprisingly, this was another great quarter for UiPath with revenue up 31.6% year on year. But the revenue actually decreased by $44.6 million in Q1, compared to $68.8 million increase in Q4 2022. UiPath's sales do seem to have a seasonal pattern to them, however the management is guiding for a further drop in revenue in the next quarter, so we think it is worth keeping an eye on the situation.

Guidance for the next quarter indicates UiPath is expecting revenue to grow 17.6% year on year to $230 million, slowing down from the 40.2% year-over-year increase 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 21% 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.

Profitability

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 81.6% in Q1.

UiPath Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.81 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop that is still 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 Q1 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 $9.3 billion and more than $1.79 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly UiPath outperformed analysts’ revenue expectations this quarter. And we were also glad to see good revenue growth. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 7.71% on the results and currently trades at $18.14 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.