UiPath, Inc. Q2 FY2025 earnings

UiPath's second quarter of fiscal 2025 showed a business still growing at a double-digit clip. Revenue was $316.25 million, up 10.1 percent from the prior-year quarter, and first-half revenue was $651.36 million, up 12.9 percent. ARR of $1.551 billion at July 31, 2024 rose 19 percent, and net new ARR was $43 million. About 17 percent of the ARR growth came from new customers and 83 percent from existing ones. The mix keeps shifting toward recurring work. Subscription services revenue rose 22 percent, professional services and other revenue rose 16 percent, and licenses revenue fell 6 percent, a drop management tied in part to the transition to Flex Offerings that let buyers choose on-premise or cloud deployment during the contract term. Retention softened. The dollar-based net retention rate was 115 percent, down from 121 percent a year earlier, even as customers with ARR of at least $1 million grew to 293 from 254.

Profitability went the other way. Gross margin was 80.0%, down 3.0 percentage points, as cost of subscription services rose 63 percent on higher personnel and hosting costs. Hosting and software services costs rose $6.3 million and third-party vendor costs rose $2.8 million. Gross profit of $252.93 million was up 6.1 percent. The operating loss widened to $103.35 million, and the operating margin was -32.7%, down 5.7 percentage points. Restructuring actions approved on July 8, 2024 added expense across sales and marketing, research and development, and general and administrative. The net loss widened to $86.10 million, and diluted earnings per share came in at -$0.15.

Cash generation held up better than earnings. Operating cash flow was $46.38 million for the quarter, up 4.7 percent, and $146.41 million for the six months, up 31.2 percent. Non-GAAP adjusted free cash flow, a separate measure that also nets capital spending and certain other items, was $49 million for the quarter. Capital expenditures were $1.42 million, up 41.0 percent. Cash collections from customers ran roughly 12 percent higher than a year earlier. Contracted backlog grew faster than reported revenue. Current deferred revenue of $462.51 million was up 20.4 percent, and remaining performance obligations of $1.08 billion were up 19.4 percent. Cash, cash equivalents, and marketable securities totaled $1.7 billion as of July 31, 2024.

The board authorized an additional $500 million for stock repurchases, bringing remaining capacity under the programs to $554 million. UiPath had already spent $218.8 million repurchasing Class A shares in the first half. Separately, Ashim Gupta added the chief operating officer title to his chief financial officer role effective September 5, 2024, and S. Somasegar joined the board.

Guidance for the third quarter of fiscal 2025 points to ARR of $1.600 billion to $1.605 billion as of October 31, 2024 and non-GAAP operating income of about $27 million. For the full fiscal year 2025, the outlook is ARR of $1.665 billion to $1.670 billion as of January 31, 2025 and non-GAAP operating income of roughly $170 million. The company also updated its revenue guidance for both periods. No GAAP operating income outlook was given, and management pointed to the variability of stock-based compensation expense. The risk list in the filing is long and familiar. Macroeconomic and geopolitical uncertainty, foreign currency swings, longer sales cycles and heavier deal scrutiny that can move the timing of license recognition, competition from new and potentially disruptive technologies, reliance on third-party cloud infrastructure, and the difficulty of retaining key personnel all sit in the way. The restructuring is meant to streamline the organization and focus research and development on AI, but it cost money this quarter and leaves the path back to GAAP profitability an open question.