UiPath, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended July 31, 2021 (fiscal year ends January 31). The company sells an automation software platform, related maintenance and support, and professional services. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Key financial metrics
| Metric | Three months ended July 31, 2021 | Comparable 2020 period | Six months ended July 31, 2021 | Comparable 2020 period |
|---|---|---|---|---|
| Revenue | $195.5 | $139.4 | $381.7 | $252.5 |
| Gross profit / margin | $159.9 / 82% | $124.7 / 89% | $297.1 / 78% | $224.1 / 89% |
| Operating loss | $(97.8) | $(17.0) | $(333.8) | $(61.9) |
| Net income (loss) | $(100.0) | $5.0 | $(339.7) | $(47.9) |
| Operating cash flow | Not separately presented for the quarter | $(23.5) | $4.1 |
- Quarterly revenue rose 40%; six-month revenue rose 51%. Maintenance and support drove much of the increase, rising 74% for the quarter and 77% for the six months. License revenue rose 20% and 37%, respectively.
- At July 31, cash and cash equivalents were $1,826.4 and marketable securities were $70.1, for combined liquidity of $1,896.6. Current assets were $2,159.1 versus current liabilities of $374.5.
- No borrowings were outstanding under the $200 million revolving credit facility, which matures October 2023. Total liabilities were $448.9; the filing reports no other outstanding debt.
- Annualized renewal run-rate (ARR), a company-defined operating metric rather than GAAP revenue or a revenue forecast, was $726.5 at July 31, up 60% year over year. Management attributed approximately 70% of ARR growth to existing customers and 30% to new customers.
- Remaining performance obligations were $519.9, including $289.9 billed and $230.0 unbilled; the company expected to recognize 62% as revenue over the next 12 months.
Material changes and unusual items
- Profitability weakened substantially: the company moved from quarterly net income of $5.0 to a $100.0 net loss, and the six-month net loss widened to $339.7 from $47.9.
- Stock-based compensation was $92.6 in the quarter and $343.4 for the six months, versus $8.8 and $17.0 in the comparable periods. The increase was principally associated with IPO-related performance conditions for restricted stock units. Management identified this expense as a major contributor to higher operating costs and lower gross margin.
- The April 2021 IPO generated $687.9 of net proceeds for the company. A February Series F preferred-stock financing generated $749.8 net proceeds; preferred stock converted to common stock in connection with the IPO. These equity transactions drove the substantial increase in cash and stockholders’ equity.
- Other expense was $1.2 for the quarter, compared with $24.0 of other income in the prior-year quarter, primarily reflecting prior-period foreign-exchange gains. The company recorded a $0.9 net foreign-currency transaction loss for the quarter after forward-contract effects.
- In March, UiPath acquired Cloud Elements for $36.1, including $5.7 cash and $30.5 in shares. Preliminary purchase accounting included $27.7 of goodwill.
Outlook, commentary and risks
- No specific numeric revenue, earnings or cash-flow guidance is provided. Management said it expects to keep investing significantly in sales and marketing, research and development, international expansion and product development, prioritizing growth over near-term profitability and cash flow. It expects relevant expenses to rise in absolute dollars; travel and trade-show spending was expected to resume in the second half of fiscal 2022, subject to pandemic conditions.
- Management stated existing liquidity and available borrowing capacity should fund anticipated cash requirements for at least the next 12 months. It also cautioned that operating cash flows have generally been negative and that results are not necessarily indicative of future periods.
- Principal disclosed risks include slower growth or weaker renewals and customer expansion; competition and execution of product development; reliance on channel partners and third-party cloud infrastructure; international, foreign-exchange, privacy and cybersecurity exposures; and the continuing effects of COVID-19 and economic conditions. The company also cites seasonality, with historically higher bookings in its fiscal fourth quarter.
- The company reported no material litigation expected to adversely affect it and no material loss considered probable or reasonably possible. It had $3.6 of letters of credit and $26.1 of non-cancelable purchase obligations with terms of at least 12 months. Certain indemnification exposures are not capped, and maximum potential payments are indeterminable.
- Governance and share-supply considerations: Class B shares carry 35 votes each, and CEO Daniel Dines and controlled entities held approximately 88% of voting power as of July 31. The filing also disclosed that approximately 397.2 million Class A shares and related securities could become eligible for sale after the IPO lock-up period ended immediately before September 9, 2021 trading, subject to applicable restrictions.
Important facts for investors to verify
- Whether ARR growth converts into durable GAAP revenue, renewals and customer expansion; ARR is based on invoiced subscription amounts and is not a forecast.
- How much of the loss and margin deterioration reflects IPO-triggered stock compensation versus ongoing operating costs, and how margins develop as the company scales.
- Whether revenue growth can support the company’s investment plans given negative six-month operating cash flow and the stated priority on growth over near-term profitability.
- The effects of post-lock-up share availability and the dual-class structure on share supply, voting control and public-stockholder influence.
- Execution and integration of the Cloud Elements acquisition, and exposure to foreign exchange, data-protection and cloud-service risks.