June 9, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Form: 10-Q

Documents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40348

UiPath, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-4333187
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
90 Park Ave, 20th Floor New York, New York	10016
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (844) 432-0455

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A common stock, par value

$0.00001 per share

PATH

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 7, 2021, the registrant had 426,378,224 shares of Class A common stock and 82,452,748 shares of Class B common stock, each with a par value of $0.00001 per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchase of Equity Securities	76
Item 3.	Defaults Upon Senior Securities	77
Item 4.	Mine Safety Disclosures	77
Item 5.	Other Information	77
Item 6.	Exhibits	78
Signatures		79

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•

our expectations regarding our annualized renewal run-rate, or ARR, revenue, expenses, and other operating results;

•

our ability to acquire new customers and successfully retain existing customers;

•

our ability to increase the number of users who access our platform and the number of automations built on our platform by our existing customers;

•

our ability to effectively manage our growth and achieve or maintain profitability;

•

future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;

•

the costs and success of our marketing efforts and our ability to maintain and enhance our brand;

•

our growth strategies, including any further expansion into the top 25 countries as measured by gross domestic product;

•

the estimated addressable market opportunity for our platform and automation generally;

•

our reliance on key personnel and our ability to attract and retain highly-qualified personnel;

•

our ability to obtain, maintain, protect, and enforce our intellectual property rights and any costs associated therewith;

•

the effect of global events, such as COVID-19 or other public health crises, on our business, industry, and the global economy;

•

our ability to compete effectively with existing competitors and new market entrants; and

•

the size and growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe,” and similar statements, reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking

statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

UiPath, Inc.

Condensed Consolidated Balance Sheets

Amounts in thousands except per share data

(unaudited)

	As of
	April 30, 2021			January 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	1,796,267		$	357,690
Restricted cash, current		13,500			7,000
Marketable securities		83,263			102,828
Accounts receivable, net of allowance for doubtful accounts of $2,137 and $2,879, respectively		136,520			172,286
Contract assets, current		35,058			34,221
Deferred contract acquisition costs, current		13,624			10,653
Prepaid expenses and other current assets		41,672			49,752
Total current assets		2,119,904			734,430
Restricted cash, non-current		—			6,500
Contract assets, non-current		9,136			2,085
Deferred contract acquisition costs, non-current		44,618			32,553
Property and equipment, net		15,149			14,822
Operating lease right-of-use assets		16,490			17,260
Intangible assets, net		20,423			10,191
Goodwill		58,478			28,059
Deferred tax asset, non-current		7,836			8,118
Other assets, non-current		14,536			12,443
Total assets	$	2,306,570		$	866,461
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	5,642		$	6,682
Accrued expenses and other current liabilities		51,057			36,660
Accrued compensation and employee benefits		49,802			110,736
Deferred revenues, current		222,089			211,078
Total current liabilities		328,590			365,156
Deferred revenues, non-current		55,224			61,325
Operating lease liabilities, non-current		12,968			14,152
Other liabilities, non-current		10,247			7,564
Total liabilities		407,029			448,197
Commitments and contingencies (Note 11)
Convertible preferred stock, $0.00001 par value per share, 0 and 297,973 shares authorized as of April 30, 2021 and January 31, 2021, respectively; 0 and 294,257 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively		—			1,221,968
Stockholders' equity (deficit)
Preferred stock, $0.00001 par value per share, 20,000 and 0 and shares authorized as of April 30, 2021 and January 31, 2021, respectively; 0 shares issued and outstanding as of April 30, 2021 and January 31, 2021		—			—
Class A common stock, $0.00001 par value per share, 2,000,000 and 581,000 shares authorized as of April 30, 2021 and January 31, 2021, respectively; 425,326 and 75,177 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively		4			1
Class B common stock, $0.00001 par value per share, 115,741 shares authorized as of April 30, 2021 and January 31, 2021; 82,453 and 110,653 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively		1			1
Additional paid-in capital		3,117,853			179,175
Accumulated other comprehensive loss		(8,294	)		(12,521	)
Accumulated deficit		(1,210,023	)		(970,360	)
Total stockholders’ equity (deficit)		1,899,541			(803,704	)
Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)	$	2,306,570		$	866,461

The accompanying notes are an integral part of these condensed consolidated financial statements.

UiPath, Inc.

Condensed Consolidated Statements of Operations

Amounts in thousands except per share data

(unaudited)

	Three Months Ended April 30,
	2021			2020
Revenue
Licenses	$	100,216		$	63,759
Maintenance and support		77,642			43,196
Services and other		8,359			6,148
Total revenue		186,217			113,103
Cost of revenue
Licenses		2,454			1,417
Maintenance and support		14,179			5,543
Services and other		32,377			6,678
Total cost of revenue		49,010			13,638
Gross profit		137,207			99,465
Operating expenses
Sales and marketing		205,751			90,931
Research and development		93,040			26,729
General and administrative		74,415			26,676
Total operating expenses		373,206			144,336
Operating loss		(235,999	)		(44,871	)
Interest income		941			530
Other expense, net		(3,218	)		(7,837	)
Loss before income taxes		(238,276	)		(52,178	)
Provision for income taxes		1,387			662
Net loss	$	(239,663	)	$	(52,840	)
Net loss per share attributable to common stockholders, basic and diluted	$	(1.11	)	$	(0.33	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		215,352			159,003

The accompanying notes are an integral part of these condensed consolidated financial statements.

UiPath, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Amounts in thousands

(unaudited)

	Three Months Ended April 30,
	2021			2020

Net loss	$	(239,663	)	$	(52,840	)
Other comprehensive income (loss), net of tax:
Unrealized loss on available-for-sale marketable securities, net		(27	)		—
Foreign currency translation adjustments		4,254			8,313
Other comprehensive income, net		4,227			8,313
Comprehensive loss	$	(235,436	)	$	(44,527	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

UiPath, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Amounts in thousands

(unaudited)

	Three Months Ended April 30, 2021
		Convertible Preferred Stock						Common Stock										Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ (Deficit) Equity
								Class A					Class B
		Shares			Amount			Shares			Amount		Shares			Amount		Amount			Amount			Amount			Amount
Balance as of January 31, 2021			294,257		$	1,221,968			75,177		$	1		110,653		$	1	$	179,175		$	(12,521	)	$	(970,360	)	$	(803,704	)
Issuance of convertible preferred stock, net of issuance costs			12,043			749,836			—			—		—			—		—			—			—			—
Conversion of convertible preferred stock to common stock upon initial public offering			(306,300	)		(1,971,804	)		306,300			3		—			—		1,971,801			—			—			1,971,804
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other issuance costs			—			—			13,000			—		—			—		687,903			—			—			687,903
Conversion of shares of Class B common stock into shares of Class A common stock			—			—			28,200			—		(28,200	)		—		—			—			—			—
Shares issued as consideration for business acquisition			—			—			543			—		—			—		30,446			—			—			30,446
Issuance of common stock upon exercise of stock options			—			—			1,881			—		—			—		3,114			—			—			3,114
Vesting of early exercised stock options			—			—			—			—		—			—		1,646			—			—			1,646
Issuance of common stock upon settlement of restricted stock units			—			—			389			—		—			—		—			—			—			—
Tax withholdings on settlement of restricted stock units			—			—			(164	)		—		—			—		(9,218	)		—			—			(9,218	)
Stock-based compensation expense			—			—			—			—		—			—		252,986			—			—			252,986
Other comprehensive income, net of tax			—			—			—			—		—			—		—			4,227			—			4,227
Net loss			—			—			—			—		—			—		—			—			(239,663	)		(239,663	)
Balance as of April 30, 2021			—		$	—			425,326		$	4		82,453		$	1	$	3,117,853		$	(8,294	)	$	(1,210,023	)	$	1,899,541

	Three Months Ended April 30, 2020
		Convertible Preferred Stock						Common Stock										Additional Paid-in Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Total Stockholders’ Deficit
								Class A					Class B
		Shares			Amount			Shares			Amount		Shares			Amount		Amount			Amount			Amount			Amount
Balance as of January 31, 2020			282,108		$	996,389			41,883		$	—		115,741		$	1	$	72,229		$	6,226		$	(877,967	)	$	(799,511	)
Issuance of common stock upon exercise of stock options			—			—			2,166			—		—			—		536			—			—			536
Compensation expense related to secondary transactions			—			—			—			—		—			—		35			—			—			35
Stock-based compensation expense			—			—			—			—		—			—		8,166			—			—			8,166
Other comprehensive income, net of tax			—			—			—			—		—			—		—			8,313			—			8,313
Net loss			—			—			—			—		—			—		—			—			(52,840	)		(52,840	)
Balance as of April 30, 2020			282,108		$	996,389			44,049		$	—		115,741		$	1	$	80,966		$	14,539		$	(930,807	)	$	(835,301	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

UiPath, Inc.

Condensed Consolidated Statements of Cash Flows

Amounts in thousands

(unaudited)

	Three Months Ended April 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(239,663	)	$	(52,840	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,172			3,147
Amortization of deferred contract acquisition costs		4,920			8,006
Amortization of deferred loan cost		66			—
Net amortization of premium on marketable securities		558			—
Stock-based compensation expense		250,835			8,201
Non-cash operating lease costs		1,734			1,879
(Benefit from) provision for bad debt		(709	)		29
Deferred income taxes		21			(52	)
Changes in operating assets and liabilities:
Accounts receivable		35,973			9,769
Contract assets		(8,148	)		(4,781	)
Deferred contract acquisition costs		(20,205	)		(5,782	)
Prepaid expenses and other assets		7,666			1,109
Accounts payable		(528	)		4,251
Accrued expense and other liabilities		4,573			(1,646	)
Accrued compensation and employee benefits		(60,433	)		(8,340	)
Operating lease liabilities, net		(1,807	)		(1,894	)
Deferred revenue		4,453			14,812
Net cash used in operating activities		(17,522	)		(24,132	)
Cash flows from investing activities
Purchases of marketable securities		(94,157	)		—
Sales of marketable securities		89,383			—
Maturities of marketable securities		23,755			—
Purchases of property and equipment		(2,200	)		(460	)
Capitalization of software development costs		(410	)		—
Payment related to business acquisition, net of cash acquired		(5,498	)		—
Net cash provided by (used in) investing activities		10,873			(460	)
Cash flows from financing activities
Proceeds from initial public offering, net of underwriting discounts and commissions		692,369			—
Payments of initial public offering costs		(2,406	)		—
Proceeds from issuance of convertible preferred stock		750,000			—
Payments of issuance costs for convertible preferred stock		(164	)		—
Proceeds from exercise of stock options		3,114			536
Proceeds from credit facility		—			78,828
Net cash provided by financing activities		1,442,913			79,364
Effect of exchange rate changes		2,313			7,955
Net increase in cash, cash equivalents and restricted cash		1,438,577			62,727
Cash, cash equivalents and restricted cash - beginning of period		371,190			234,131
Cash, cash equivalents and restricted cash - end of period	$	1,809,767		$	296,858
Supplemental disclosure of cash flow information
Cash paid for interest	$	214		$	368
Cash paid for income taxes		3,076			455
Supplemental disclosure of non-cash investing and financing activities
Stock-based compensation capitalized for software development	$	2,151		$	—
Value of shares issued in payment of business acquisition		30,446			—
Deferred offering costs, accrued but not yet paid		1,328			—
Reduction in accrued expenses and other liabilities for vesting of early exercised stock options		1,646			—
Tax withholdings on net settlement of restricted stock units, accrued but not yet paid		9,218			—
Deferred payments related to business acquisitions		—			18,269

The accompanying notes are an integral part of these consolidated financial statements.

UiPath, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Description of Business

Description of Business

UiPath, Inc. (the “Company,” “we,” “us,” or “our”) was incorporated in Delaware in June 2015 and is headquartered in New York. We offer an end-to-end automation platform which provides a range of robotic process automation (“RPA”) solutions via a suite of interrelated software offerings (the “RPA Software”), including:

•

UiPath Studio (“Studio”) – Studio is an easy to use, drag-and-drop development platform designed for RPA developers looking to build complex process automations with built-in governance capabilities. Studio features robust debugging tools, application programming interface (“API”) automation, wizards to automate desktop or web applications, the ability to leverage custom code, and a simple way to integrate machine learning models into production workflows.

•

UiPath Robots (“Robots”) – Robots emulate human behavior to execute the processes built in Studio. Robots can work unattended (without human supervision in any environment, virtual or not) or attended (with a human triggering the process).

•

UiPath Orchestrator (“Orchestrator”) – Orchestrator tracks and logs Robot activity, along with what people do in tandem, to maintain strict compliance and governance through dashboards and visualization tools. Orchestrator enables seamless integration with our marketplace, which is UiPath’s database of vetted, pre-built, and reusable automation activities and components, software, and third-party products, giving users the opportunity to leverage our global RPA community and deploy automations across cloud, on-premises, and hybrid environments.

We provide our offerings by selling a software license to customers, which allows customers to use the RPA Software on their own hardware (i.e., term and perpetual licenses) or in the cloud. Additionally, we offer maintenance and support, training, and implementation services to our customers to facilitate their adoption of the RPA Software.

We have legal presence in 29 countries, with our principal operations in the United States, Romania, and Japan.

Initial Public Offering

On April 23, 2021, we completed our initial public offering (“IPO”), in which we issued and sold 13.0 million shares of our Class A common stock at a public offering price of $56.00 per share, including 3.6 million shares of Class A common stock pursuant to the exercise in full of the underwriters’ option to purchase additional shares. We received net proceeds of $692.4 million after deducting underwriting discounts and commissions of $35.6 million. In addition, the selling stockholders, named in our final prospectus that forms a part of the Registration Statement on Form S-1 (File No. 333-254738) for the IPO filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(4) on April 21, 2021 (the “Final Prospectus”), sold an additional 14.5 million shares, for which we did not receive any proceeds. In connection with the IPO, all shares of convertible preferred stock then outstanding automatically converted into an aggregate of 306.3 million shares of Class A common stock.

Prior to the IPO, deferred offering costs, which consisted primarily of accounting, legal and other fees related to the IPO, were capitalized within other assets, non-current in the condensed consolidated balance sheets. Upon the consummation of the IPO, $4.5 million of deferred offering costs were reclassified into stockholders’ equity as an offset to IPO proceeds. As of January 31, 2021, $1.5 million of deferred offering costs were included within other assets, non-current in the condensed consolidated balance sheet. As of April 30, 2021, $1.3 million in deferred offering costs associated with the IPO had not yet been paid.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in the Final Prospectus. There have been no significant changes to these policies during the three months ended April 30, 2021.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable regulations of the SEC

UiPath, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

regarding interim financial reporting, and include the financial statements of UiPath, Inc. and its wholly owned subsidiaries in which we hold a controlling financial interest or are the primary beneficiary. Intercompany transactions and accounts have been eliminated in consolidation.

As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending January 31, 2022 or for any other interim period or for any other future year. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended January 31, 2021 contained in the Final Prospectus.

Fiscal Year

Our fiscal year ends on January 31. References to fiscal year 2022, for example, refer to the fiscal year ending January 31, 2022.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the condensed consolidated financial statements and the amounts of revenue and expenses reported during the period. We evaluate estimates based on historical and anticipated results, trends, and various other assumptions. Such estimates include, but are not limited to, revenue recognition, estimated expected benefit period for deferred contract acquisition costs, allowance for doubtful accounts, fair value of financial assets and liabilities including accounting and fair value of derivatives, fair value of acquired assets and assumed liabilities, useful lives of long-lived assets, capitalized software development costs, carrying value of operating lease right-of-use (“ROU”) assets, incremental borrowing rates for operating leases, amount of stock-based compensation expense including determination of fair value of common stock prior to the IPO, timing and amount of contingencies, and valuation allowance for deferred income taxes. Actual results could differ from these estimates and assumptions.

Foreign Currency

The functional currency of our non-U.S. subsidiaries is the local currency. Asset and liability balances denominated in non-U.S. dollar currencies are translated into U.S. dollars using period-end exchange rates, while revenue and expenses are translated using the average monthly exchange rates. Differences are included in stockholders’ equity (deficit) as a component of accumulated other comprehensive income (loss). Financial assets and liabilities denominated in currencies other than the functional currency are recorded at the exchange rate at the time of the transaction and subsequent gains and losses related to changes in the foreign currency are included in other expense, net in the condensed consolidated statements of operations. For the three months ended April 30, 2021 and 2020, we recognized transaction losses of $2.9 million and $7.3 million, respectively.

Derivative Financial Instruments

Since fiscal year 2021, we use derivative financial instruments, such as foreign currency forward contracts, to manage foreign currency exposures. We account for our derivative financial instruments as either assets or liabilities and carry them at fair value. These foreign currency contracts are not designated and do not qualify as hedging instruments, as defined by Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging.

As of April 30, 2021 and January 31, 2021, derivative financial instruments with a fair value totaling $0.2 million and $0.6 million, respectively, were recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets. We record changes in the fair value of these derivatives as a component of other expense, net in the condensed consolidated statements of operations. The notional principal of foreign currency forward contracts outstanding was $123.0 million and $138.6 million as of April 30, 2021 and January 31, 2021, respectively. The net gain associated with foreign currency forward contracts was $0.6 million and none for the three months ended April 30, 2021 and 2020, respectively.

UiPath, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Concentration of Risks

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, marketable securities and accounts receivable. We maintain our cash balance at financial institutions that management believes are high-credit, quality financial institutions, where deposits, at times, exceed the Federal Deposit Insurance Corporation (“FDIC”) limits. As of April 30, 2021 and January 31, 2021, 99% and 92%, respectively, of our cash, cash equivalents, and restricted cash were concentrated in the United States, European Union (“EU”) countries, and Japan.

We extend differing levels of credit to customers based on creditworthiness, do not require collateral deposits, and when necessary maintain reserves for potential credit losses based upon the expected collectability of accounts receivable. We manage credit risk related to our customers by performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures.

Significant customers are those which represent 10% or more of our total revenue for the period or accounts receivable at the balance sheet date. For the three months ended April 30, 2021 and 2020, no single customer accounted for 10% or more of our total revenue. As of April 30, 2021 and January 31, 2021, no single customer accounted for 10% or more of our accounts receivable.

Revenue Recognition

We derive our revenue from the sale of licenses for use of our proprietary software, maintenance and support for licenses, right to access certain software products that we host (i.e., software as a service (“SaaS”)), and professional services. In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when or as a customer obtains control of the promised goods and services. The amount of revenue recognized reflects the consideration to which we expect to be entitled in exchange for those goods or services. To achieve the core principle of this ASC 606, we apply the following five steps:

Identification of the contract, or contracts, with the customer;

Identification of the performance obligations in the contract;

Determination of the transaction price;

Allocation of the transaction price to the performance obligations in the contract; and

Recognition of the revenue when, or as, a performance obligation is satisfied.

Our significant performance obligations and our application of ASC 606 to each of those performance obligations are discussed in further detail below.

Licenses

We primarily sell term licenses, including through our hybrid offerings, which provide customers the right to use software for a specified period of time, and perpetual licenses, which provide customers the right to use software for an indefinite period of time. For both types of licenses, revenue is recognized at the point in time at which the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon commencement of the renewal term. For licenses revenue, we generally invoice when the license(s) are provided.

Maintenance and Support

We generate maintenance and support revenue through technical support and the provision of unspecified updates and upgrades on a when-and-if-available basis for both term and perpetual license arrangements. Maintenance and support for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Maintenance and support represents a stand-ready obligation for which revenue is recognized ratably over the term of the arrangement. For maintenance and support services, we generally invoice when the associated license(s) are provided and upon renewals. Maintenance and support also includes revenue from the SaaS component of our hybrid offerings and revenue from SaaS arrangements, as such revenue was not material for the three months ended April 30, 2021 and 2020. The SaaS component of our hybrid offerings and our SaaS arrangements are stand-ready obligations to provide access to our products. Revenues from the SaaS component of our hybrid offerings and from SaaS arrangements are recognized on a ratable basis over the contractual period of the arrangement, as control of the services is transferred to the customer.

UiPath, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Services and Other

Revenue from services and other consists of fees associated with professional services for process automation, customer education and training services. A substantial majority of our professional services contracts are recognized on a time and materials basis, and the related revenue is recognized as the services are rendered. For professional services, we invoice as the work is incurred or in advance.

Material Rights

Contracts with customers may include material rights, which are also performance obligations. Material rights primarily arise when the contract gives the customer the right to renew or to receive products or services at a greater discount in the future. The revenue associated with material rights is recognized at the earlier of the time of exercise or expiration of the customer’s rights.

Contracts with Multiple Performance Obligations

Most contracts with customers contain multiple performance obligations. The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price (“SSP”) basis. We determine SSP for performance obligations using observable inputs, such as standalone sales, historical contract pricing, and industry pricing data available to the public. SSP reflects the amount we would charge for that performance obligation if it were sold separately in a standalone sale, and the price we would sell to similar customers in similar circumstances.

Other Policies and Judgments

Payment terms and conditions vary by contract type, although terms generally require payment within 30 to 60 days of the invoice date. In certain arrangements, we receive payment from a customer either before or after the performance obligation has been satisfied; however, our contracts do not contain a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing. We applied the practical expedient in ASC 606 and did not evaluate payment terms of one year or less for the existence of a significant financing component. Revenue is recorded net of sales tax. We generally do not offer a right of refund in our contracts.

Contract Balances

Contract assets consist of unbilled accounts receivable, which occur when a right to consideration for our performance under the customer contract occurs before invoicing the customer. Accounts receivable are recorded when the customer has been billed and the right to consideration is unconditional.

Contract liabilities consist of deferred revenue. Revenue is deferred when we invoice in advance of performance under a contract.

Deferred Contract Acquisition Costs

We defer sales commissions that are incremental to the acquisition of customer contracts. These costs are recorded as deferred contract acquisition costs on the condensed consolidated balance sheets. We determine whether costs should be deferred based on the terms of our sales compensation plans and based on whether the sales commissions are incremental to a customer contract and would not have occurred absent the customer contract.

During fiscal years 2020 and 2021, sales commissions for renewals of subscription contracts were commensurate with the sales commissions paid for the acquisition of the initial subscription contract because there was minimal to no difference in sales commission rates between new and renewal contracts. Sales commissions paid upon the initial acquisition of a contract were therefore amortized over the contract term, while sales commissions paid related to renewal contracts were amortized over the renewal term. In the case of costs to obtain a contract with a customer when the amortization period would have been one year or less, we applied the practical expedient ASC 340-40, Other Assets, Deferred Costs, which allows for expensing of these costs as incurred.

At the end of fiscal year 2021, we approved a new sales incentive plan for fiscal year 2022 under which sales commissions for renewals of subscription contracts are not commensurate with the commissions paid on initial contracts. Under the new sales

UiPath, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

incentive plan, we defer incremental commissions related to initial contracts and amortize such costs over the expected period of benefit, which we determined to be five years.

Amortization is recognized consistently with the pattern of revenue recognition of the respective performance obligation to which the contract costs relate. Amortization of deferred contract acquisition costs is included in sales and marketing expense in the condensed consolidated statements of operations.

We periodically review deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. There were no impairment losses recorded during the three months ended April 30, 2021 and 2020.

Cost of Revenue

Licenses

Cost of licenses revenue consists of all direct costs to deliver our licenses to customers, amortization of software development costs, direct costs related to third party software resales, and amortization of acquired developed technology.

Maintenance and Support

Cost of maintenance and support revenue primarily consists of personnel-related expenses of our customer support and technical support teams, including salaries and bonuses, stock-based compensation expense, and employee benefit costs. Cost of maintenance and support revenue also includes third-party consulting services, hosting costs related to our hybrid and cloud-based arrangements, amortization of acquired developed technology and capitalized software development costs related to cloud products, and allocated overhead. Overhead is allocated to cost of maintenance and support revenue based on applicable headcount. We recognize these expenses as they are incurred.

Services and Other

Cost of services and other revenue primarily consists of personnel-related expenses of our professional services team, including salaries and bonuses, stock-based compensation expense, and employee benefit costs. Cost of services and other revenue also includes third-party consulting services and allocated overhead. Overhead is allocated to cost of services and other revenue based on applicable headcount. We recognize these expenses as they are incurred.

Stock-Based Compensation

We recognize stock-based compensation expense in accordance with the provisions of ASC 718, Compensation - Stock Compensation. ASC 718 requires the measurement and recognition of compensation expense for all stock-based awards made to employees, directors, and non-employees based on the grant date fair value of the awards. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. The fair value of each restricted stock unit (“RSU”) and restricted stock award (“RSA”) is estimated based on the fair value of the Company’s Class A common stock on the grant date. Prior to the IPO, the Company determined the fair value of its Class A common stock for financial reporting as of each grant date based on numerous objective and subjective factors and management’s judgement. Subsequent to the IPO, the Company determines the fair value using the market closing price of its Class A common stock on the date of grant. Stock-based compensation expense is included in cost of revenue and operating expenses within our condensed consolidated statements of operations based on the expense classification of the individual earning the award. The fair value of awards with only service-based vesting conditions is recognized as expense over the requisite service period on a straight-line basis. The fair value of awards that contain both service-based and performance-based vesting conditions, such as RSUs that were granted under the UiPath, Inc. 2018 Stock Plan (the “2018 Plan”) before our IPO, are recognized as expense using the accelerated attribution method once it is probable that the performance condition will be met.

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Non-accelerated filer

Smaller reporting company

Emerging growth company