What Happened:
Shares of automation software company UiPath (NYSE:PATH) jumped 5.8% in the morning session after the company reported third quarter results with ARR (annual recurring revenue), reported revenue, and non-GAAP operating profit expectations exceeding expectations. Guidance for next quarter was fine, with ARR ahead, while revenue and non-GAAP operating profit were roughly in line.
Management acknowledged a variable business environment, noting a more significant impact on low-end compared to high-end customers. This resulted in a decrease in the total customer count for the quarter. Regardless, the company observed "marquee" deals this quarter, contributing to a 29% growth in RPO (remaining performance obligations, a leading indicator of revenue). Lastly, management highlighted that the most recent platform release "delivered scores of new capabilities that seamlessly translate the potential of AI into tangible action, accelerate productivity, spark innovation, and drive business outcomes for our customers." Overall, this quarter's results were solid, and shareholders should feel optimistic.
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What is the market telling us:
UiPath's shares are very volatile and over the last year have had 35 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 7.2% on the news that the company reported second quarter results with ARR (annual recurring revenue) roughly in line with estimates and revenue narrowly exceeding analysts' expectations. However, non-GAAP operating profit beat by a large magnitude, showing that expense leverage came in 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.
Overall, it was a solid quarter, showing that the company is staying on track. As a reminder, the company has been going through a repositioning of its go-to-market strategy, and these results, especially the $1+ million customer net adds, show that there is strong progress being made. Lastly, the company announced a $500 million stock repurchase authorization. These tend to be positives, reserved for companies that are generating excess free cash flow and looking to return some to shareholders.
UiPath is up 99.6% since the beginning of the year. Investors who bought $1,000 worth of UiPath's shares at the IPO in April 2021 would now be looking at an investment worth $355.43.
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