2225

UiPath (NYSE:PATH) Q2 Sales Beat Estimates, Stock Soars


Petr Huřťák /
2023/09/06 4:39 pm EDT

Automation software company UiPath (NYSE:PATH) beat analysts' expectations in Q2 FY2024, with revenue up 18.6% year on year to $287.3 million. The company also expects next quarter's revenue to be around $315.5 million, in line with analysts' estimates. Turning to EPS, UiPath made a GAAP loss of $0.11 per share, improving from its loss of $0.22 per share in the same quarter last year.

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UiPath (PATH) Q2 FY2024 Highlights:

  • Revenue: $287.3 million vs analyst estimates of $282.1 million (1.86% beat)
  • EPS (non-GAAP): $0.09 vs analyst estimates of $0.03 ($0.06 beat)
  • Revenue Guidance for Q3 2024 is $315.5 million at the midpoint, roughly in line with what analysts were expecting
  • The company slightly raised its revenue guidance for the full year, which now stands at $1.28 billion at the midpoint
  • Free Cash Flow of $43.3 million, down 33.9% from the previous quarter
  • Gross Margin (GAAP): 82.9%, up from 81.8% in the same quarter last year

“We delivered second quarter fiscal 2024 ARR growth of 25 percent while executing on our strategic initiatives and driving operational excellence across the company,” 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.

Sales Growth

As you can see below, UiPath's revenue growth has been strong over the last two years, growing from $195.5 million in Q2 FY2022 to $287.3 million this quarter.

UiPath Total Revenue

This quarter, UiPath's quarterly revenue was once again up 18.6% year on year. However, its revenue actually decreased again in Q2 by $2.28 million, following the same trend as its $19 million decrease in Q1 2024. While one-off fluctuations aren't always concerning, we have no doubt that shareholders would like to see its revenue rebound soon.

Next quarter's guidance suggests that UiPath is expecting revenue to grow 20.1% year on year to $315.5 million, in line with the 19% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 19.5% over the next 12 months before the earnings results announcement.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. 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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 82.9% in Q2.

UiPath Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.83 left to spend on developing new products, sales and marketing, and general administrative overhead. Despite its recent drop, UiPath still has an excellent gross margin that allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.

Key Takeaways from UiPath's Q2 Results

With a market capitalization of $9.08 billion, UiPath is among smaller companies, but its $1.83 billion cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

UiPath's ARR (annual recurring revenue) was roughly in line with estimates, and the company narrowly top analysts' revenue expectations this quarter. However, non-GAAP operating profit beat by a large magnitude, showing that expense leverage came in strong strong. We were also glad that its full-year guidance was raised across the board and came in higher than Wall Street's estimates, especially on non-GAAP operating profit. Zooming out, we think this was still a solid quarter, showing that the company is staying on track. The stock is up 5.37% after reporting and currently trades at $17.08 per share.

So should you invest in UiPath right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.