UPDATED 19:30 EDT / JUNE 08 2021

AI

UiPath’s stock slides despite a solid first post-IPO earnings report

Automation technology platform company UiPath Inc. saw its stock take a beating in after-hours trading today after its first quarterly earnings call following an initial public offering in late April.

That came despite a strong performance in which UiPath beat expectations on revenue, post a surprise profit versus an expected loss. It also threw in a strong outlook for the next three-month period.

The company reported a first-quarter profit before certain costs such as stock compensation of two cents per share on revenue of $186.2 million for the quarter, up 65% from one year ago. Wall Street had been looking for a five-cent loss on revenue of $168.6 million.

UiPath co-founder and Chief Executive Daniel Dines (pictured) said the company showed an “exceptionally strong start” to fiscal year 2022.

“We believe automation is the next layer in the software stack,” Dines said in a statement. “Our vision is to enable the fully automated enterprise through our unique combination of UI Automation, API Management and AI to best emulate human workers and help organizations assign all automatable work to robots enterprise-wide.”

UiPath is widely considered to be the leader in the robotic process automation market. Its RPA platform is used by companies to reduce costs and operational errors by automating repetitive work. It relies on artificial intelligence models that learn how employees perform common tasks in business applications. Then, it creates software robots that can replicate those workflows, thereby reducing the need to perform many of those tasks manually.

The company’s initial public offering was well received. Its share price jumped 23% on its first day of trading as it raised $1.4 billion from the offering, and it continues to trade well above its IPO price.

Dines said the company’s RPA platform is growing fast, noting that its first-quarter annual recurring revenue rose 64% year-over-year, to $653 million.

The company also reported that its total customer count has risen to more than 8,500 worldwide. Of those, 1,105 deliver annual recurring revenue of $100,000 or more to the company, while 104 spend more than $1 million per year on its platform.

Market watchers, including Dave Vellante of SiliconANGLE sister market research firm Wikibon, were impressed with UiPath’s performance:

Analyst Holger Mueller of Constellation Research Inc. told SiliconANGLE that UiPath wrote another chapter in its success story with its first quarter as a public company, delivering very strong revenue growth of 60%.

“That’s a good sign, but the problem is that UiPath’s costs have risen even more,” Mueller said. “While it’s possible to justify and even take delight in the four-times increase in research and development spending, the same can’t be said for its other costs. Marketing costs doubled, while general and administrative expenses almost tripled, outpacing its revenue growth.”

That’s not a good long-term strategy, he said: “UiPath’s management will need to find a way to rein in their expenses going forward, while still showing good growth.

During the quarter, UiPath made a small update to its RPA platform, debuting a new module called UiPath Task Mining that points out manual business processes that enterprises should automate. The new module observes how employees interact with business applications on a day-to-basis and uses AI to identify actions that repeat themselves frequently. Using this information, RPA teams can spot parts of employees’ workflows that can be done more efficiently with the help of RPA bots.

“Given our existing momentum, we plan to continue to invest in growth while maintaining operational rigor as we run our business,” UiPath Chief Financial Officer Ashim Gupta added.

Looking ahead, UiPath offered strong guidance, saying it expects second-quarter revenue of $180 million to $185 million, which would represent a gain of 33% from one year ago. For fiscal 2020, it’s looking for revenue of $850 million to $855 million, implying growth of 40% and far ahead of Wall Street’s target of $827 million in sales.

Gupta told Barron’s in an interview after the report that the company was guiding optimistically for the rest of the year. “Demand has never been stronger,” he said.

For all the optimism, UiPath’s stock fell more than 7% after-hours, though Barron’s said that may be the result of a “partial early lock-up release” that freed up about 30% of the company’s stock to trade on the open market under the terms of its IPO.

Photo: SiliconANGLE

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