UiPath (NYSE:PATH) Exceeds Q2 Expectations, Stock Soars
Automation software company UiPath (NYSE:PATH) reported Q2 CY2024 results topping analysts’ expectations, with revenue up 10.1% year on year to $316.3 million. The company expects next quarter’s revenue to be around $347.5 million, in line with analysts’ estimates. It made a non-GAAP profit of $0.04 per share, down from its profit of $0.09 per share in the same quarter last year.
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UiPath (PATH) Q2 CY2024 Highlights:
- Revenue: $316.3 million vs analyst estimates of $303.7 million (4.1% beat)
- Adjusted Operating Income: $6.45 million vs analyst estimates of $0.4 million (beat)
- EPS (non-GAAP): $0.04 vs analyst expectations of $0.03 (in line)
- The company lifted its revenue guidance for the full year to $1.42 billion at the midpoint from $1.41 billion, a 1.1% increase (also lifted full year ARR and adjusted operating income guidance)
- Gross Margin (GAAP): 80%, down from 83.1% in the same quarter last year
- Free Cash Flow Margin: 13.4%, down from 30.2% in the previous quarter
- Annual Recurring Revenue: $1.55 billion at quarter end, up 18.6% year on year
- Market Capitalization: $7.29 billion
“We are pleased with our second quarter results, with ARR growing 19 percent year-over-year, a testament to the team's improved execution and the compelling value that our AI-powered automation platform delivers to our customers,” said Daniel Dines, UiPath 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.
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 23.3% annualized revenue growth over the last three years has been decent, and its sales came in at $316.3 million this quarter.
This quarter, UiPath’s quarterly revenue was once again up 10.1% year on year. However, its revenue actually decreased again in Q2 by $18.86 million, following the same trend as its $70.14 million decrease in Q1 CY2024. While one-off fluctuations aren’t always concerning, we have no doubt that shareholders would like to see its revenue rebound soon.
Next quarter’s guidance suggests that UiPath is expecting revenue to grow 6.6% year on year to $347.5 million, slowing down from the 24% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 7% over the next 12 months before the earnings results announcement.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
UiPath has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors while maintaining a cash cushion. The company’s free cash flow margin averaged 24.1% over the last year, quite impressive for a software business.
UiPath’s free cash flow clocked in at $42.48 million in Q2, equivalent to a 13.4% margin. The company’s cash profitability regressed as it was 2.8 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict UiPath’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 24.1% for the last 12 months will decrease to 19.4%.
Key Takeaways from UiPath’s Q2 Results
This was a beat and raise quarter. It was good to see UiPath beat analysts’ revenue and adjusted operating profit expectations this quarter. We were also glad that the company raised its full-year ARR, revenue, and adjusted operating guidance. Overall, this was a strong quarter. The stock traded up 5.4% to $13.43 immediately following the results.
So should you invest in UiPath 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.
