UiPath, Inc. — Form 10-Q Summary
Reporting period: Quarter ended July 31, 2022 (UiPath fiscal 2023 second quarter); comparisons are with the quarter ended July 31, 2021. The filing also reports six-month results. UiPath sells an automation software platform, including licenses, subscription services and professional services.
Key financial results
| Metric | Three months ended July 31, 2022 | Year-over-year change | Six months ended July 31, 2022 |
|---|---|---|---|
| Revenue | $242.2 million | +24% | $487.3 million; +28% |
| Gross profit / margin | $197.6 million / 82% | Margin unchanged | $397.7 million / 82%; margin up from 78% |
| Operating loss | $120.2 million | Wider than $97.8 million | $236.1 million; narrower than $333.8 million |
| Net loss | $120.4 million | Wider than $100.0 million | $242.9 million; narrower than $339.7 million |
| Operating cash flow | Not separately provided for the quarter | $(76.6) million, versus $(23.5) million |
Quarterly revenue growth was led by subscription services, up 38% to $124.7 million; license revenue rose 9% to $103.7 million, and professional services and other revenue rose 44% to $13.9 million. For the six-month period, subscription services increased 43%, licenses 13%, and professional services and other 47%.
Sales and marketing was the largest operating expense: $181.5 million for the quarter, up 26%. Six-month total operating expenses were $633.8 million, approximately flat year over year, while revenue grew 28%. The six-month gross-margin improvement was attributed mainly to lower stock-based compensation in the prior-year comparison, which included IPO-related RSU expense. Stock-based compensation was $189.7 million for the six months, down from $343.4 million.
Liquidity, debt and other metrics
- At July 31, cash and cash equivalents were $1.607 billion and marketable securities totaled $116.6 million, or approximately $1.724 billion combined. Combined liquidity was down from approximately $1.885 billion at January 31, 2022.
- No borrowings were outstanding under the $200 million revolving credit facility, which matures October 30, 2023. The facility is secured by substantially all assets other than intellectual property and includes customary covenants.
- ARR was $1.043 billion, up 44% year over year. Dollar-based net retention was 132%, down from 144%. Customers with ARR above $1 million increased to 190 from 118.
- Remaining performance obligations were $709.0 million; the company expected to recognize 62% as revenue over the next 12 months.
- Accounts receivable was $193.5 million and current liabilities were $460.1 million at quarter-end. The filing does not provide a current-quarter cash-flow statement.
Material changes, outlook and risks
- Restructuring: The company approved a workforce reduction of approximately 5% and exited its Brooklyn office lease. It recorded $12.0 million in restructuring costs, primarily employee termination benefits; remaining costs were expected to be immaterial and recognized by fiscal year-end.
- Acquisition: UiPath acquired NLP company Re:infer on July 29 for $44.5 million of purchase consideration. Purchase accounting was provisional, including $34.3 million of goodwill. An additional $7.6 million in employment-contingent shares is to be expensed as compensation over three years.
- Cash requirements: The company reported $275.4 million of non-cancelable purchase obligations with terms of 12 months or longer, primarily for cloud infrastructure and services. Management said existing liquidity, customer payments and borrowing capacity should fund anticipated requirements for the next 12 months and the long term.
- Outlook: No numerical revenue, ARR or earnings guidance is stated in the supplied filing text. Management expects continued investment in product development and sales, and anticipates increases in several expense categories; it also expects cloud adoption to raise hosting costs and affect operating margins.
- Risks and contingencies: Management highlighted potential effects of inflation, higher interest rates, foreign-exchange movements, geopolitical events including the war in Ukraine, and weaker customer IT spending. Renewal and expansion performance, competition, talent retention, execution of growth plans, and acquisition integration are also risks. The company reported no litigation it considered likely to have a material adverse effect and no material changes to previously disclosed risk factors beyond those described.
- Other notable items: A 10% hypothetical foreign-exchange rate change was estimated to have a $22.6 million translation impact for the six-month period; the company recorded $2.2 million of net foreign-currency transaction losses. It incurred $1.9 million of business-use aircraft expenses in the six months for an aircraft owned by a co-CEO through a special-purpose entity. Management stated disclosure controls were effective at a reasonable assurance level.
Important facts for investors to verify
- Whether ARR growth and customer expansion can persist as dollar-based net retention declined to 132% from 144%.
- Whether cloud-hosting costs and subscription-service delivery expenses pressure gross margins as SaaS grows.
- How operating cash burn develops relative to the substantial cash balance and non-cancelable purchase commitments.
- Whether restructuring delivers the intended sales productivity and expense discipline, and whether Re:infer integration and provisional purchase accounting change.
- The extent of dilution and future expense from stock-based compensation, employee equity withholding, and acquisition-related shares.
- How foreign-exchange volatility, macroeconomic conditions and customer renewal behavior affect reported results and outlook.