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UiPath (NYSE:PATH) Reports Strong Q2 But Stock Drops


Kayode Omotosho /
2021/09/07 4:20 pm EDT
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Automation software company UiPath (NYSE:PATH) reported Q2 FY2022 results beating Wall St's expectations, with revenue up 40.2% year on year to $195.5 million. UiPath made a GAAP loss of $100 million, down on its profit of $4.98 million, in the same quarter last year.

Is now the time to buy UiPath? Access our full analysis of the earnings results here, it's free.

UiPath (PATH) Q2 FY2022 Highlights:

  • Revenue: $195.5 million vs analyst estimates of $186.7 million (4.71% beat)
  • EPS (non-GAAP): $0.01 vs analyst estimates of -$0.06 ($0.07 beat)
  • Revenue guidance for Q3 2022 is $208 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow was negative $3.46 million, compared to negative free cash flow of -$20.14 million in previous quarter
  • Customers: 9,100, up from 8,500 in previous quarter
  • Gross Margin (GAAP): 81.7%, up from 73.6% previous quarter

“We continued our very strong momentum in the second quarter of fiscal year 2022 with ARR growing 60 percent year-over-year to $726.5 million. Our results were driven by both new customer additions, ending the quarter with more than 9,100 customers, as well as robust expansion with existing customers, reflected in our best-in-class dollar-based net retention rate of 144 percent,” said Daniel Dines, UiPath Co-Founder and 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 push to increase productivity in the workplace is expected to drive the rapid adoption of automation software solutions in the coming years.

Sales Growth

As you can see below, UiPath's revenue growth has been incredible over the last year, growing from quarterly revenue of $139.3 million, to $195.5 million.

UiPath Total Revenue

And unsurprisingly, this was another great quarter for UiPath with revenue up an absolutely stunning 40.2% year on year. On top of that, revenue increased $9.3 million quarter on quarter, a strong improvement on the $21.6 million decrease in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 34% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better than UiPath. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. 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, licences, technical support and other necessary running expenses was at 81.7% in Q2.

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. 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 Q2 Results

With a market capitalization of $32.2 billion, more than $1.89 billion in cash and the fact it is operating close to free cash flow break-even the company is in a strong financial position to invest in growth.

We were very impressed by the strong improvements in UiPath’s gross margin this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a solid quarter and we have no doubt shareholders will feel good about the results. But the market expectations were very high and the company is down -5.62% on the results and currently trades at $58.95 per share.

UiPath may have had a good quarter, so should you invest 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.