StockStory - StockStory - Wed May 29, 3:19PM CDT
Automation software company UiPath (NYSE:PATH) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 15.7% year on year to $335.1 million. On the other hand, next quarter's revenue guidance of $302.5 million was less impressive, coming in 11.6% below analysts' estimates. It made a non-GAAP profit of $0.13 per share, improving from its profit of $0.11 per share in the same quarter last year.
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UiPath (PATH) Q1 CY2024 Highlights:
- Revenue: $335.1 million vs analyst estimates of $333 million (small beat)
- EPS (non-GAAP): $0.13 vs analyst estimates of $0.12 (11.7% beat)
- Revenue Guidance for Q2 CY2024 is $302.5 million at the midpoint, below analyst estimates of $342.1 million
- The company dropped its revenue guidance for the full year from $1.56 billion to $1.41 billion at the midpoint, a 9.6% decrease
- Gross Margin (GAAP): 83.5%, down from 85% in the same quarter last year
- Free Cash Flow of $98.8 million, down 32.5% from the previous quarter
- Annual Recurring Revenue: $1.51 billion at quarter end, up 20.7% year on year
- Net Revenue Retention: 118%
- Market Capitalization: $10.74 billion
“We are pleased to report that ARR surpassed $1.5 billion in the first quarter of fiscal 2025, a testament to our market leading Business Automation Platform and the strategic role automation plays in digital transformation,” said Daniel Dines, UiPath Founder and Chief Innovation Officer.
Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE:PATH) makes software that helps companies automate repetitive computer tasks.
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.
Sales Growth
As you can see below, UiPath's revenue growth has been strong over the last three years, growing from $186.2 million in Q1 2022 to $335.1 million this quarter.
This quarter, UiPath's quarterly revenue was once again up 15.7% year on year. However, the company's revenue actually decreased by $70.14 million in Q1 compared to the $79.33 million increase in Q4 CY2023. This situation is worth monitoring as UiPath's sales have historically followed a seasonal pattern but management is guiding for a further revenue drop in the next quarter.
Next quarter's guidance suggests that UiPath is expecting revenue to grow 5.3% year on year to $302.5 million, slowing down from the 18.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 19.9% over the next 12 months before the earnings results announcement.
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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 $98.8 million in Q1, up 35.9% year on year.
UiPath has generated $335.5 million in free cash flow over the last 12 months, an impressive 24.8% 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 Q1 Results
We struggled to find many strong positives in these results. Its revenue and EPS beat analysts' estimates, but it lowered its full-year revenue guidance, falling significantly short of Wall Street's expectations. The company noted it saw, "increased deal scrutiny and lengthening sales cycles for large multi-year deals". Furthermore, CEO Rob Enslin unexpectedly resigned; Founder and current Chief Innovation Officer Daniel Dines will reassume the CEO role on June 1, 2024. Overall, the results could have been better. The company is down 29.6% on the results and currently trades at $12.88 per share.
UiPath may have had a tough quarter, but does that actually create an opportunity to invest 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.
