UiPath, Inc. Q1 FY2024 earnings

UiPath reported first quarter fiscal 2024 revenue of $289.6 million, up 18 percent from the prior-year quarter. ARR reached $1.249 billion, up 28 percent year over year, with net new ARR of $45.0 million. Dollar-based net retention was 122 percent, compared with 138 percent a year earlier. Management attributed about 20 percent of the ARR growth rate to new customers and 80 percent to existing ones. The count of customers spending at least $1 million a year climbed to 240 from 168, and those with ARR of at least $100 thousand rose to 1,858 from 1,574.

Profitability improved sharply. GAAP gross margin was 84.9%, up 3.3 percentage points, and non-GAAP gross margin was 87 percent. The operating loss narrowed to $46.4 million from $115.95 million a year earlier, and operating margin was -16.0%, an improvement of 31.3 percentage points. Net loss narrowed to $31.9 million from $122.6 million, and diluted loss per share of $0.06 narrowed from $0.23 in the prior-year quarter. On a non-GAAP basis, the company reported operating income of $48.2 million, against a non-GAAP operating loss of $10.9 million a year earlier.

Most of the margin gain came from cost discipline. Sales and marketing expense fell 15 percent to $160.4 million, and general and administrative expense slipped 2 percent to $56.6 million, while research and development spending rose 10 percent to $75.3 million. The company has been shrinking its workforce: an approximately 5 percent global reduction was approved in June 2022, followed by a further 6 percent cut in November 2022. Stock-based compensation expense was $85.0 million in the quarter, and general and administrative costs included a $4.2 million charitable donation of Class A shares under the Pledge 1% commitment. On the product side, UiPath pushed out platform release 2023.4 with OpenAI connectors and Clipboard AI, and announced partnerships with SAP, T-Systems, Amazon SageMaker, Amelia, and Snowflake.

Cash generation turned positive. Operating cash flow was $67.3 million, up 227.3 percent year over year, and non-GAAP adjusted free cash flow was $72.7 million. Capital expenditures were $1.9 million, down 80.7 percent. Cash, cash equivalents, and marketable securities totaled $1,786.4 million as of April 30, 2023, up from $1,759.8 million as of January 31, 2023, and the company had no outstanding debt under its credit facility. Deferred revenue of $385.9 million rose 36.7 percent, and remaining performance obligations of $903.9 million rose 33.8 percent.

For the second quarter of fiscal 2024, guidance calls for ARR of $1.301 billion to $1.306 billion as of July 31, 2023 and non-GAAP operating income of approximately $10 million. For the full fiscal year 2024, the outlook is ARR of $1.427 billion to $1.432 billion as of January 31, 2024 and non-GAAP operating income of approximately $168 million. Management said a reconciliation of the non-GAAP operating income outlook to the comparable GAAP measure is not available without unreasonable efforts, largely because stock-based compensation depends on unpredictable share price moves.

Risks cluster around demand and the cost base. The company cited foreign currency volatility, inflation, the war in Ukraine, and volatility in credit and financial markets, including industry effects from recent bank closures. It also pointed to reliance on existing customers to renew and expand, competition, and dependence on third-party cloud infrastructure. Customers with ARR of at least $1 million accounted for 45 percent of current period revenue, up from 40 percent, and those with ARR of at least $100 thousand accounted for 82 percent, up from 79 percent. The accumulated deficit stood at $1,856.2 million, and cash, cash equivalents, and marketable securities of $1,786.4 million remain the main funding source.