{"id":10883,"date":"2023-05-19T08:56:04","date_gmt":"2023-05-19T12:56:04","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/before-q1-2024-earnings-consider-uipaths-profitability-nysepath\/"},"modified":"2023-05-19T08:56:05","modified_gmt":"2023-05-19T12:56:05","slug":"before-q1-2024-earnings-consider-uipaths-profitability-nysepath","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=10883","title":{"rendered":"Before Q1 2024 Earnings, Consider UiPath’s Profitability (NYSE:PATH)"},"content":{"rendered":"
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Overview<\/h2>\n

UiPath Inc. (NYSE:PATH<\/span>) is a robotic process automation company that has been publicly traded since Q2 2021. The company sells a suite of workflow automation products centered around the UiPath Automation Platform. This platform takes the form of an IDE (integrated development environment) with a visual interface, allowing non-technical users to leverage technical capabilities which, when combined, can automate various information processes in a business context. Technical capabilities come modularized and include common types of technology such as optical character recognition (OCR) for transcribing text.<\/span><\/p>\n

The company’s stock had initial buoyancy for a month after its IPO but has since cratered while significantly underperforming the NASDAQ Composite.<\/p>\n

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\"Seeking<\/span>
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Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The price return trendline this year has seen a change of pattern, with the company’s exceeding the NASDAQ Composite on a price return basis for most of the year. The monthly correlation of this instrument to the NASDAQ Composite has also been far lower than historical norms since mid-April, and the sell-off that again brought it below the Composite’s price return occurred with little correlation. The recent run-up that has settled the stock at a marginally higher price return saw it again correlating with the index.<\/span><\/p>\n

Clearly, this stock has been seeing volatility and has had price action that is not purely derived from its general trading volatility as compared to the market (beta). It also experienced appreciation after its latest earnings report and is now set to release Q1 2023 earnings in less than a week, on May 24th.<\/p>\n

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\"Seeking<\/span>
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Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

This article will review UiPath’s financials and see what we can garner about its performance heading into earnings.<\/p>\n

Financials<\/h2>\n

UiPath has overall continued to grow y\/y even as it has experienced cyclicality in its business q\/q. Since software businesses do not generally see their revenues fluctuate q\/q, this is interesting to see; it is not immediately apparent why this would be the case. Additionally, growth appears to have fallen off a cliff in the most recent quarter, with a y\/y growth rate of 6.51% that is the company’s worst-yet as a public firm.<\/p>\n

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Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n

\"Seeking<\/span>
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Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

UiPath has also continued to operate unprofitably since becoming public. Worth noting here is that the firm did post a quarter of positive operating income for fiscal Q4 2022 (period ending Jan 2021), the quarter prior to which it went public. This came along with a net income margin of 12.63% that quarter, which was buoyed to a level beyond operating income by one-off EBITDA adjustments.<\/p>\n

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Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

While fiscal Q4 2022 was a good sign that the firm’s business model makes sense, I don’t consider that one quarter to be too indicative of its economics going forward. The company is now in the process of pivoting to profitability, as with many other middle-market technology firms at this time. It still generated only a -8.98% net margin in its most recent quarter.<\/p>\n

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Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

On the cash side of things UiPath appears to have more recent momentum. The picture here is similar to income; UiPath showed 3 quarters of positive cash from operations before going public and then appears to have doubled down on growth. It is still good to see that the latest quarter saw the firm post an impressive 30.5% cash operating margin.<\/p>\n

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Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The company also has a clean balance sheet, with only $63.4M in total debt and little in the way of interest payments ($0 last quarter, never more than $1M any of the last 10 quarters).<\/p>\n

The company also continues to make use of stock-based compensation, albeit at slower rates. As of the most recent quarter the company’s q\/q common share growth was 0.53%. If we compound this rate 4 times (1.0053^4), we get a yearly common share growth rate of 2.14%. This appears to already be at the level in which it shouldn’t serve as too much of a concern for investors worried about share dilution from stock based compensation.<\/p>\n

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Q2 2021<\/p>\n<\/td>\n

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Q3 2021<\/p>\n<\/td>\n

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Q4 2021<\/p>\n<\/td>\n

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Q1 2022<\/p>\n<\/td>\n

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Q2 2022<\/p>\n<\/td>\n

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Q3 2022<\/p>\n<\/td>\n

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Q4 2022<\/p>\n<\/td>\n<\/tr>\n

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Common Shares Outstanding<\/p>\n<\/td>\n

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507.8<\/p>\n<\/td>\n

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513.2<\/p>\n<\/td>\n

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524.8<\/p>\n<\/td>\n

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541.2<\/p>\n<\/td>\n

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544.9<\/p>\n<\/td>\n

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549.5<\/p>\n<\/td>\n

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552.4<\/p>\n<\/td>\n<\/tr>\n

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Shares Outstanding q\/q<\/p>\n<\/td>\n

 <\/td>\n\n

1.06%<\/p>\n<\/td>\n

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2.26%<\/p>\n<\/td>\n

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3.13%<\/p>\n<\/td>\n

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0.68%<\/p>\n<\/td>\n

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0.84%<\/p>\n<\/td>\n

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0.53%<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

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