UiPath, Inc. — Form 10-Q Summary
Reporting period: Three months ended April 30, 2021 (the company’s first quarter of fiscal 2022). Comparatives are the three months ended April 30, 2020. Amounts below are in U.S. dollars; financial-statement figures are in millions unless stated otherwise.
Business context
UiPath sells an automation platform built around robotic process automation software, with revenue from licenses, maintenance and support, and professional services. It reported more than 8,500 customers and operates internationally. The quarter included the company’s April 2021 IPO and the March acquisition of Cloud Elements, an API integration platform provider.
Key financial metrics
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Revenue | $186.2 | $113.1 |
| Gross profit / gross margin | $137.2 / 74% | $99.5 / 88% |
| Operating loss | $(236.0) | $(44.9) |
| Net loss | $(239.7) | $(52.8) |
| Cash used in operating activities | $(17.5) | $(24.1) |
| ARR at quarter-end | $652.6 | $397.8 |
- Revenue grew 65%: licenses rose 57% to $100.2 million; maintenance and support rose 80% to $77.6 million; services and other rose 36% to $8.4 million.
- ARR, a company-defined operating metric and not a revenue forecast, grew 64%. Management attributed approximately 30% of ARR growth to new customers and 70% to existing customers.
- Gross margin fell 14 percentage points. The filing primarily attributes the decline and the much larger operating loss to IPO-triggered stock-based compensation, including $233.0 million of cumulative RSU expense upon satisfaction of IPO-related performance conditions. Total stock-based compensation expense was $250.8 million, versus $8.2 million a year earlier.
- Cash, cash equivalents and restricted cash totaled $1,809.8 million at April 30; marketable securities were $83.3 million. Total assets were $2,306.6 million and total liabilities $407.0 million. Current assets were $2,119.9 million versus current liabilities of $328.6 million.
- No borrowings were outstanding under the $200 million senior secured revolving credit facility, which matures October 30, 2023. The facility is secured by substantially all assets other than intellectual property.
Material changes and unusual items
- The IPO issued 13.0 million Class A shares at $56 per share. The company received approximately $692.4 million after underwriting discounts and commissions; the filing also reports approximately $687.9 million of proceeds after offering expenses. Selling stockholders sold another 14.5 million shares, with no proceeds to the company.
- In February, the company raised $750 million gross in a Series F preferred financing; the preferred shares converted into Class A shares upon the IPO.
- Cloud Elements was acquired for approximately $36.1 million in total consideration, including $30.4 million in UiPath shares. The preliminary purchase accounting included $30.5 million of goodwill, which is not tax deductible.
- Net loss per share was $(1.11), compared with $(0.33). Weighted-average shares and share classes changed substantially due to the preferred-stock conversion and IPO.
Cash flow, outlook and risks
- Operating cash use improved year over year, with customer cash collections approximately 59% higher, partly offset by operating payments including compensation, commissions and bonuses. Investing cash flow was $10.9 million, including marketable-security activity and the Cloud Elements acquisition. Financing cash flow was $1,442.9 million, mainly from the IPO and Series F financing.
- Remaining performance obligations were $463.9 million at quarter-end; the company expected to recognize 63% over the next 12 months. This is contracted consideration, not a revenue forecast.
- Management said existing liquidity and available borrowing capacity should fund anticipated cash requirements for at least the next 12 months. It plans substantial continued investment in sales and marketing, research and development, international expansion and infrastructure, and does not expect to prioritize near-term profitability or cash flow. It expects certain operating expenses to rise in absolute dollars; travel and trade-show spending could resume in the second half of fiscal 2022, subject to pandemic conditions. No specific financial guidance was provided in the supplied filing text.
- Principal disclosed risks include continued losses, uncertain ability to sustain growth or achieve profitability, customer renewal and concentration risks, channel-partner dependence, competition, scaling and cloud-service reliability, cybersecurity and privacy compliance, foreign-exchange exposure, and the effects of COVID-19 and economic conditions. The company also highlighted potential volatility from stock-based compensation, seasonality and public-market share sales.
- Management reported disclosure controls were effective at a reasonable assurance level. The filing says a prior material weakness in revenue-recognition controls was remediated, while noting that effectiveness had not been tested by management or the auditor at that point. The company reported no litigation expected to have a material adverse effect.
Most important facts for investors to verify
- How much of the reported loss and margin decline reflects IPO-related RSU compensation, and what ongoing stock-based compensation and dilution may follow.
- The reconciliation of IPO proceeds: the filing cites approximately $692.4 million after underwriting discounts and commissions and approximately $687.9 million after offering expenses.
- ARR definition, renewal and expansion trends, and how ARR relates to recognized revenue; ARR is not a forecast and may not be comparable with similarly named metrics at other companies.
- Cash burn, customer collections, investment plans and management’s stated 12-month liquidity assessment, particularly if growth or collections weaken.
- Customer and channel concentration, renewal performance, and the integration and operating contribution of Cloud Elements.
- Potential share-supply and governance effects: the dual-class structure gives Class B shares 35 votes each, and the CEO and controlled entities held approximately 88% of voting power as of April 30, 2021.