UiPath (NYSE:PATH) Beats Q4 Sales Targets, Provides Optimistic Full-Year Guidance

Full Report / March 13, 2024

Automation software company UiPath (NYSE:PATH) announced better-than-expected results in Q4 FY2023, with revenue up 31.3% year on year to $405.3 million. Revenue guidance for the full year also exceeded analysts' estimates but next quarter's guidance of $332.5 million was less impressive, coming in 4.4% below expectations. It made a non-GAAP profit of $0.22 per share, improving from its profit of $0.15 per share in the same quarter last year.

UiPath (PATH) Q4 FY2023 Highlights:

  • Revenue: $405.3 million vs analyst estimates of $383.7 million (5.6% beat)
  • EPS (non-GAAP): $0.22 vs analyst estimates of $0.16 (40.5% beat)
  • Revenue Guidance for Q1 2024 is $332.5 million at the midpoint, below analyst estimates of $347.9 million
  • Management's revenue guidance for the upcoming financial year 2024 is $1.56 billion at the midpoint, beating analyst estimates by 1.8% and implying 19.1% growth (vs 23% in FY2023)
  • Gross Margin (GAAP): 86.8%, up from 84.7% in the same quarter last year
  • Free Cash Flow of $141.8 million, up from $43.67 million in the previous quarter
  • Annual Recurring Revenue (ARR): $1.46 billion at quarter end, up 21.6% year on year
  • 2024 ARR Guidance: $1.73 billion
  • Market Capitalization: $13.95 billion

Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE:PATH) makes software that helps companies automate repetitive computer tasks.

A lot of jobs involve repeating the same rules-based tasks, requiring only simple decision making and little creativity. Not only do these tasks become tedious over time, resulting in a loss of productivity and errors but with the rising cost of labor are also becoming more expensive to perform.

UiPath’s robotic process automation (RPA) software uses technologies such as artificial intelligence and machine learning to learn how users perform regular tasks. Then, the software creates bots that replicate these tasks such as copying and pasting data, filling out forms, and clicking through user interfaces. For example, using UiPath’s software, a bookkeeper can automatically extract financial data from digital invoices, attach any other necessary information, arrange the output in a folder and send it to his manager at a specific time daily. Given the many tasks that can be automated with UiPath, it drives significant value to businesses by cutting down processing time, reducing errors, and enabling workers to focus on higher value (and more engaging) work.

UiPath became Romania's first technology unicorn, despite several challenges in its early years. Its rapid pace of innovation has led to a lot of success in the automation software space, with founder Daniel Dines being nicknamed the “first bot billionaire” by Forbes. The initial seed round investment in the company by the Czech VC firm Credo Ventures was called the greatest European venture bet ever.

Automation Software

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.

Other players in the automation software space include Microsoft (NASDAQ: MSFT), Blue Prism, IBM (NYSE: IBM), and SAP (NYSE: SAP).

Sales Growth

As you can see below, UiPath's revenue growth has been strong over the last three years, growing from $207.9 million in Q4 2021 to $405.3 million this quarter.

UiPath Total Revenue

Unsurprisingly, this was another great quarter for UiPath with revenue up 31.3% year on year. On top of that, its revenue increased $79.33 million quarter on quarter, a very strong improvement from the $38.61 million increase in Q3 2024. This is a sign of re-acceleration of growth and great to see.

Next quarter's guidance suggests that UiPath is expecting revenue to grow 14.8% year on year to $332.5 million, slowing down from the 18.2% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $1.56 billion at the midpoint, growing 19.1% year on year compared to the 23.6% increase in FY2024.


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 86.8% in Q4.

UiPath Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.87 left to spend on developing new products, sales and marketing, and general administrative overhead. Significantly up from the last quarter, UiPath's excellent gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. UiPath's free cash flow came in at $141.8 million in Q4, up 40.1% year on year.

UiPath Free Cash Flow

UiPath has generated $304.8 million in free cash flow over the last 12 months, an impressive 23.3% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.

Key Takeaways from UiPath's Q4 Results

This was an excellent beat-and-raise quarter for UiPath. It soared past analysts' estimates across all key metrics, including revenue, gross margin, EPS, and free cash flow. Its net retention rate and full-year 2024 annualized recurring revenue guidance of $1.73 billion also came in better than expected. 

During the quarter, June Yang (former VP of Cloud AI and Industry Solutions at Google Cloud) joined the company's Board of Directors. Zooming out, we think this was a good quarter, showing that the company is staying on track. The stock is up 5% after reporting and currently trades at $25.65 per share.

Is Now The Time?

When considering an investment in UiPath, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We think UiPath is a good business. We'd expect growth rates to moderate from here, but its revenue growth has been strong over the last three years. And while its customer acquisition is less efficient than many comparable companies, the good news is its impressive gross margins indicate excellent business economics. On top of that, its customers are increasing their spending quite quickly, suggesting they love the product.

Given its price-to-sales ratio of 9.3x based on the next 12 months, the market is certainly expecting long-term growth from UiPath. There are definitely things to like about UiPath, and there's no doubt it's a bit of a market darling, at least for some. But when comparing the company against the broader tech landscape, it seems there's a lot of good news already priced in.

Wall Street analysts covering the company had a one-year price target of $25.05 right before these results (compared to the current share price of $25.65).

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