UiPath, Inc. Q2 FY2024 earnings

UiPath posted $287.3 million of revenue in the second quarter of fiscal 2024, up 18.6% from $242.2 million a year earlier. Gross profit climbed 20.6% to $238.3 million, outpacing the top line, and gross margin finished at 82.9%, up 1.4 percentage points from 81.6%. Subscription services again grew faster than license revenue, and management expects that shift to continue as customers buy Flex Offerings that recognize more revenue ratably. First-half revenue reached $576.9 million, up 18.4% from $487.3 million, with six-month gross margin of 83.9% against 81.6% a year ago.

The bottom line improved far more sharply than sales. The quarter's operating loss was $77.6 million, narrower than the $120.2 million loss reported a year earlier, a reduction of 35.4%. Operating margin moved to -27.0% from -49.6%. Net loss was $60.4 million, or a loss of $0.11 per diluted share, versus a net loss of $120.4 million, or a loss of $0.22 per diluted share, in the prior-year quarter. Non-GAAP operating income was $30.1 million and non-GAAP gross margin was 86%, showing how much of the GAAP loss sits in stock-based compensation and related add-backs.

Cash generation stands out. Operating cash flow was $44.3 million for the quarter, a swing from the $23.7 million used in the prior-year quarter, and $111.6 million for the six months, against $76.6 million used a year earlier. Capital expenditures fell 84.8% to $1.0 million in the quarter, from $6.6 million. Management credited the six-month improvement in operating cash flow to customer collections that ran roughly 30% higher than in the comparable period, partly offset by annual bonus payments. Non-GAAP adjusted free cash flow was $46.6 million for the quarter.

ARR reached $1,307.9 million at July 31, 2023, up 25% year over year, with net new ARR of $59.0 million. The mix of that growth deserves attention. Dollar-based net retention slipped to 121% from 132% as of July 31, 2022, so expansion inside the existing base is slowing even as new customers keep signing. Customers with ARR of at least $1 million rose to 254 from 190, and those with at least $100,000 rose to 1,930 from 1,660. Remaining performance obligations rose 27.7% to $905.4 million, and current deferred revenue rose 31.4% to $384.0 million. Cash, cash equivalents, restricted cash, and marketable securities totaled $1,830.0 million at July 31, 2023, versus $1,759.8 million at January 31, 2023.

Guidance points to a stronger second half. For the third quarter of fiscal 2024, UiPath expects ARR of $1.359 billion to $1.364 billion as of October 31, 2023 and non-GAAP operating income of approximately $32 million. For the full fiscal year 2024, ARR is guided to $1.432 billion to $1.437 billion as of January 31, 2024, with non-GAAP operating income of approximately $188 million. Revenue guidance was also given for the third quarter and the full year. A reconciliation of the non-GAAP operating income outlook to the comparable GAAP measure is not provided because stock-based compensation is hard to project.

The board authorized a $500 million stock repurchase program that runs through March 1, 2025, a sign leadership views the cash position as ample. Restructuring work tied to the earlier 5% and 6% workforce reductions wrapped up during the quarter, which helps explain lower sales and marketing spend alongside higher research and development costs. The filing lists plenty of risks: macroeconomic and geopolitical pressure including the Russia-Ukraine conflict, inflation and interest rate moves, foreign exchange volatility, instability in the financial services sector, competition from AI-driven tools, reliance on existing customers to renew and expand, and dependence on third-party cloud infrastructure.