What Happened: Shares of automation software company UiPath (NYSE:PATH) fell 6.9% in the morning session after the company reported fourth-quarter results and provided revenue guidance for the next quarter below Wall Street's expectations. Also, the new net ARR (annual recurring revenue) came in weaker than expected, falling 9% year on year. In addition, the net retention rate continued to decline, coming in at 119% during the quarter (vs. 121% in Q3 and 123% in the same quarter last year). Lastly, customer count declined compared to the previous quarter and came in below consensus.
On the other hand, UiPath exceeded analysts' estimates across all key metrics, including revenue, gross margin, EPS, and free cash flow. The topline benefitted from a 38% growth in the licenses segment, while maintenance and support revenue came in roughly in line. Its full-year 2024 annualized recurring revenue guidance of $1.73 billion also came in better than expected. Notably, the company achieved the first quarter of GAAP profitability as it continued to implement cost discipline measures.
During its 2024 AI summit, the company intends to release a new large language model that "combines open source LLMs and our specialized AI, proprietary knowledge of business documents and communication data." UiPath also highlighted Autopilot, its recent AI innovation that "makes it easier for people of all skills to build automations."
Finally, during the quarter, June Yang (former VP of Cloud AI and Industry Solutions at Google (NASDAQ:GOOGL) Cloud) joined the company's Board of Directors. Zooming out, this was a mixed quarter, with the markets likely worried about the weaker topline numbers as well as the "uncertain macro" called out by the company.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy UiPath? Find out by reading the original article on StockStory.
What is the market telling us: UiPath's shares are very volatile and over the last year have had 34 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 7.2% on the news that the company reported second quarter results with ARR (annual recurring revenue) roughly in line with estimates and revenue narrowly exceeding analysts' expectations. However, non-GAAP operating profit beat by a large magnitude, showing that expense leverage came in strong. We were also glad that its full-year guidance was raised across the board and came in higher than Wall Street's estimates, especially on non-GAAP operating profit.
Overall, it was a solid quarter, showing that the company is staying on track.
As a reminder, the company has been going through a repositioning of its go-to-market strategy, and these results, especially the $1+ million customer net adds, show that there is strong progress being made. Lastly, the company announced a $500 million stock repurchase authorization. These tend to be positives, reserved for companies that are generating excess free cash flow and looking to return some to shareholders.
UiPath is down 4.3% since the beginning of the year, and at $22.79 per share it is trading 15.2% below its 52-week high of $26.88 from February 2024. Investors who bought $1,000 worth of UiPath's shares at the IPO in April 2021 would now be looking at an investment worth $330.07.