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UiPath (NYSE:PATH) Surprises With Q3 Sales But Stock Drops


Adam Hejl /
2021/12/08 4:17 pm EST
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Automation software company UiPath (NYSE:PATH) reported Q3 FY2022 results beating Wall St's expectations, with revenue up 49.9% year on year to $220.8 million. The company expects that next quarter's revenue would be around $282 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. UiPath made a GAAP loss of $122.7 million, down on its loss of $70.7 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) Q3 FY2022 Highlights:

  • Revenue: $220.8 million vs analyst estimates of $209.2 million (5.53% beat)
  • EPS (non-GAAP): $0 vs analyst estimates of -$0.04 ($0.04 beat)
  • Revenue guidance for Q4 2022 is $282 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow was negative $7.67 million, compared to negative free cash flow of $3.46 million in previous quarter
  • Gross Margin (GAAP): 80.4%, down from 88.1% same quarter last year

“Our continued growth at scale was driven by customers across verticals and geographies who recognize that the power of automation not only increases efficiency, but also drives revenue growth and creates a significant competitive advantage. This increasing awareness of the power of our end-to-end automation platform coupled with strong execution by our team resulted in fiscal third quarter ARR of $818 million, an increase of 58 percent year-over-year,” 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 exceptional over the last year, growing from quarterly revenue of $147.2 million, to $220.8 million.

UiPath Total Revenue

And unsurprisingly, this was another great quarter for UiPath with revenue up 49.9% year on year. On top of that, revenue increased $25.2 million quarter on quarter, a very strong improvement on the $9.3 million increase in Q2 2022, and a sign of re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 32.8% over the next twelve months, although estimates are likely to change post earnings.

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, licenses, technical support and other necessary running expenses was at 80.4% in Q3.

UiPath Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.80 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite it going down over the last year, this 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 Q3 Results

With a market capitalization of $24.1 billion, more than $1.87 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 impressed by the exceptional revenue growth UiPath delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, there was a deterioration in gross margin and the guidance for the next quarter has not exceeded analysts' expectations. Overall, we think this was a decent quarter, that should leave shareholders feeling positive. But considering the valuation is still quite high, investors might have been expecting more and the company is down 5.63% on the results and currently trades at $45.03 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.