UiPath Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 24, 2023

There are 15 speakers on the call.

Operator

Good afternoon, and welcome to the UiPath First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to our host, Kelsey Turcotte, Senior Vice President, Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Good afternoon and thank you for joining Today to review UiPath's Q1 fiscal 2024 financial results, which we announced in our earnings press release issued after the close of the market today. On the call with me are Daniel Dines, UiPath's Co Founder and Co Chief Executive Officer Rob Enslin, Co Chief Executive Officer and Ashim Gupta, Chief Financial Officer. Rob will start the discussion and then turn the call over to Daniel. After that, Ashim will review our results and provide guidance, Then we'll open the call for questions. Our earnings press release and financial supplemental materials are posted on the UiPath Investor Relations Web is at ir.

Speaker 1

Uipath.com. These materials include GAAP to non GAAP reconciliations. We will be discussing non GAAP metrics on today's call. This afternoon's call includes forward looking statements about our ability to drive growth and operational efficiency and our financial guidance for the fiscal Q2 and full year 2024. Actual results may differ materially from those expressed in the forward looking statements due to many factors, and therefore, investors should not place undue reliance on these statements.

Speaker 1

For a discussion of the material risks and uncertainties that could affect Our actual results, please refer to our annual report on Form 10 ks for the year ended January 31, 2023, and our other reports filed with the SEC, including our quarterly report on Form 10 Q for the period ended April 30, 2023 to be filed with the SEC. Forward looking statements made on this call reflect our views as of today. We undertake no obligation to update them. I would like to highlight that this webcast is being accompanied by slides, which this quarter includes an embedded AI demonstration video. We will post the slides and a copy of our prepared comments to our Investor Relations website immediately following the conclusion of this call.

Speaker 1

Now I'd like to hand the call over to Rob.

Speaker 2

Thank you, Kelsey, and good afternoon, everyone. Thank you for joining us. As always, I want to take a moment to thank our team and partners for everything you do to make UiPath successful and our customers for placing their trust in us. It was a good start to the fiscal year with Q1 results reflecting our commitment to driving growth at scale, coupled with increasing profitability and cash flow. While the broader environment continues to be variable, The level of engagement with prospects and momentum in our large customers gives us confidence in the strategic role automation will continue to play in Digital Transformation.

Speaker 2

Turning to the numbers. We ended the quarter with ARR of $1,249,000,000 an increase of 28%, driven by net new ARR of $45,000,000 Excluding FX headwind of $6,000,000 net new ARR totaled $51,000,000 1st quarter revenue was $290,000,000 Excluding the impact of foreign exchange, revenue was $297,000,000 and grew 21% year over year. Non GAAP operating margin increased from negative 4% in the Q1 of last year to positive 17% in the Q1 of this year, a significant acceleration of our path to the 20% -plus long term operating target we laid out at Investor Day. I am very pleased with the progress we are making to better align the team customer requirements and the resulting efficiency improvements. Non GAAP adjusted free cash flow was a first quarter record of CAD 73,000,000, the first time we delivered positive non GAAP adjusted free cash flow at the outset of the year.

Speaker 2

We ended the quarter with approximately 10,850 customers, reflecting our focus on acquiring customers with a high propensity We invest in automation. New customers included Liberty Bank, New York City Health and Hospitals, Vermont Federal Credit Union and Navios Benefit Solutions. And we have seen good momentum in our large customers. Customers with €1,000,000 or more in ARR increased 43% year over year to 240. Our customers with 100,000 or more in ARR increased to approximately 1860.

Speaker 2

Customers choose UiPath because of our market leading technology and breadth of platform capabilities, which allows for step consolidation, lender rationalization and accelerate ROI, helping them achieve speed and agility For example, Colgate Palmolive, With more than 70 automations across various departments, they expanded to broader platform capabilities In the Q1, Azeem migrates to an integrated platform, consolidates vendor spend and utilize our governance capabilities. Anduisilica, which started the UiPath journey with test suite, expanded to additional platform capabilities as they look to improve cost savings, productivity and employee and customer experiences. It has been a busy start to this fiscal year. We launched our new segmentation model, nearly doubled the number of solution accelerators, added SAP solution accelerators to complement our partnership, Hosted our annual AI Summit for a record number of participants, introduced our next platform release 2023 And our several strategic partnerships strengthened our Board and management teams. We also recently hosted 2 incredible events, our first ever UiPath Summit, an exclusive event For our digital C suite and most forward thinking customers and our UiPath together public sector event in Washington, There were 2 clear takeaways.

Speaker 2

Our platform is driving meaningful ROI for our customers and they want to understand how they can leverage UiPath's platform to deliver the power of generative AI responsibly and at scale. Since inception, our platform has been infused with AI. We offer our customers best in class model Read communications, understand documents and see screens and interfaces. Coupled with this next wave of generative AI, We can help customers make automation even more accessible across their employees and significantly expand use cases. Equally as important, our automation platform provides the guarantees, guardrails and governance that customers require to deliver generative AI safely.

Speaker 2

We are investing. Like the market, we are moving fast, which Daniel will talk about in a few minutes. AI is not new to UiPath. We are delivering real value to our customers today. During the quarter, Grupo Bocho Cario, a UiPath customer since 2022 decided to replace the competitor and migrate the entire automation program to us With a strategic focus on AI as they work to accelerate development and deliver better governance.

Speaker 2

And also purchase document understanding to process invoices and plan to roll it out across other use cases. Another great example is Hyundai Capital, which is innovating the car buying experience for Genesis, Hyundai and Kia Dealerships and their customers by leveraging document understanding to streamline the loan and lease process, reducing the time it takes to fund loan, translates into a better experience for both the dealership and the customer. And with C level sponsorship, they're exploring additional opportunities further streamline the organization and drive efficiencies to the bottom line using AI and UiPath automation. Our partner ecosystem also continues to play a critical role in our success. During the quarter, we expanded Our partnership with Snowflake launching a prebuilt solution for their manufacturing data cloud to instantly connect data to business processes without using complex code.

Speaker 2

These technical integrations enhance our customers' ability to seamlessly integrate across In addition, go to market partners expand our reach to customers in a scalable and cost effective manner. A great example is Keyon, a German multinational and UiPath customer since 2019. Working with PwC, Keyon continues to scale across the organization as they look to incorporate AI and test suite into the automation program. We also recently announced a partnership with T Systems, a trusted cloud provider Classified by the German Federal Ministry For Economic Affairs and Energy, deliver our end to end platform at scale to public sector organizations And large enterprises across Germany, Austria and Switzerland. As part of this partnership, we plan to work with key systems to develop industry Specific offerings to joint customers.

Speaker 2

1 of the first of these is Deutsche Landtiket, where key systems and UiPath anticipate helping them manage Demand for the new flat rate transport tickets in Germany. And finally, we announced an expansion of our partnership with SAP to jointly offer automation capabilities to customers. This partnership will help enterprises build a clean core on S4HANA Cloud, which complements SAP build process automation, enabling organizations to improve efficiency and productivity across SAP and non SAP workloads. We are pleased to be the premier sponsor for all three of SAP Sapphire events in Orlando, Barcelona and Sao Paulo. And tomorrow, I will join the SAP team on stage at Sapphire Barcelona to underscore the partnership we now have in place.

Speaker 2

Our partners are also very excited about the announcement. Greg pursued, BNY's America's Vice Chair Told us that having 2 alliances within EY's ecosystem that leverage the strength of UiPath's automation platform to help clients Even more value from the SAP investment makes a lot of strategic sense. There is a significant amount of inbound interest, and I'm convinced that together, we can help customers achieve game changing results. In summary, I am pleased with the progress we have made on our strategic initiatives, which are raising our profile and relevancy not only with our customers, but also with go to market and technical partners. That being said, we are mindful of ongoing macroeconomic variability, And we have more work to do, extending our market leadership, helping customers get the most out of automation and continuing to improve our execution.

Speaker 2

And with that, I'll turn the call over to Daniel.

Speaker 3

Thanks, Rob. Good afternoon, everyone. We are very excited to have introduced our newest platform release, 2023.4, earlier this month. This release further accelerates our customers' ability to discover, automate And operate at scale and continues to expand our leadership position in UI, AI and API Automation. Our customers are very excited about this new release and our plans to use generative AI to further increase adoption of our platform.

Speaker 3

We believe that generative AI will be a very important part of our enterprise AI foundation along with Domain Specific AI and Automation. And it is our platform that will allow us to deliver in a secure and governed manner That enterprise customers require generative AI is very powerful, but by itself Has the limited scope of capabilities in the enterprise. It can read and generate text, but not take action. AI without automation is like a brain without a body. However, when AI is combined with an enterprise automation platform, It opens a whole new set of use cases and opportunities for customers.

Speaker 3

Our software robots Can already read screens and documents and now with generative AI, they can answer customer Emails create summaries of complex documents and respond to support questions. Customers Can use these new generative skills to extend existing automations in areas such as customer service and Imagine entirely new ones. We also believe generative AI will democratize access to our platform, making it easier for both knowledge workers and developers to create automations using just natural language descriptions. Generative AI will ask you every employee. 1 of our biggest competitive Advantages in leveraging the power of generative AI is our long time investment in AI computer vision.

Speaker 3

With computer vision, we understand screens from legacy to modern applications and our knowledge of screens Continues to grow exponentially with more than 2,000,000 calls every day to our AI Computer Vision Service In the UiPath Automation Cloud, we are uniquely able to combine this understanding of screens With the cognitive intelligence of generative AI to watch work happen, understand what's being done and automate it in our enterprise ready platform. Let me show you a quick video of a research project code named Wingman that we are currently working on, which illustrates this. If you are not on the webcast,

Speaker 4

So this is how we expect Project Wingman will work. Consider someone who needs to file an expense report. They can start by simply typing, create an expense report and email my manager. Using generative AI, The robot understands what the user is trying to do and makes a high level plan. With UiPath, State of the art computer vision, the robot knows what it sees on the screen and can determine what needs to be done next.

Speaker 4

The robot will download files, launch applications, click buttons and even identify the correct fields and type into the form. Step by step, the robot will create a workflow that completes the plan. Looking at the workflow, You can see that the robot can also use generative AI to compose an e mail with context from the expense report and use

Speaker 3

This shows how generative AI and computer vision can create Robust workflows without writing any code. As this technology matures from research into products, We expect to extend the capabilities beyond developers to knowledge workers who will be able to simply describe tasks in natural language and have them executed directly by our platform. At our 4 0.4 user conference in the fall of 2021, I described The potential of generative AI using the phrase semantic automation. I am very pleased to report that our first offering in this space, clipboard AI is now in preview. Clipboard AI intelligently transfers data between documents, spreadsheets and apps, Understanding the content and automatically inserting the data into the right places.

Speaker 3

This use case Has the power to transform how people work and is made possible by the depth of our expertise in combining AI Computer Vision, our own domain specific models and generative AI. Generative AI also creates A compelling opportunity in automating manual tests. Today application testing often still requires manual intervention, which makes it slow, unresponsive and highly repetitive. The opportunity for a combination of generative AI and computer vision Prompted through natural language descriptions and delivered through our platform has the potential to meaningfully transform the testing market and we are well positioned to execute here. Generative AI represents a massive opportunity for UiPath, and I am working closely with the team and our customers as we infuse it across our platform and realize its potential.

Speaker 3

This is why I'm so excited to welcome Karanen Tourell to our Board of Directors as a former practitioner with C level technology roles at GSK, Walmart, Baxter International and DaimlerChrysler, Kiernan brings a wealth of experience and the customer perspective, which I believe will benefit the entire company. Before I close and hand the call over to Ashim, I would like to thank everyone who has contributed to UiPath's success. We remain focused on building and enduring Rule of 40 company and are pleased that our Q1 represents another step on the journey. With that, I will turn it over to Ashim.

Speaker 5

Thank you, Daniel, and good afternoon, everyone. Unless otherwise indicated, I'll be discussing results on a non GAAP basis and all growth rates are year over year. I also want to note that since we price and sell in local currency, fluctuations in FX rates impact results. We continue to execute against our strategic imperatives of balanced growth and profitability, which resulted in 1st quarter 1st quarter revenue outperformance as well as record non GAAP operating margin and non GAAP adjusted free cash flow. As a result, we are meaningfully increasing both our full year non GAAP operating income and non GAAP adjusted free cash flow outlook this afternoon.

Speaker 5

Turning to the Q1, ARR totaled $1,249,000,000 an increase of 28%, driven by net new ARR of $45,000,000 Excluding the FX headwind of $6,000,000 Net new ARR totaled $51,000,000 We ended the quarter with approximately 10,850 customers, including great new logos like ASDA, Jubilant Life Sciences, Robert Weed Corporation, TaskRabbit and T and L. As Rob mentioned, we saw strength in large customers as they continue to increase their UiPath footprint with broader platform adoption and increased consumption. A great example is Tetra Pak, a customer since 2018 who continues to expand on our platform adding additional products this to invest in automation as we transition our smaller accounts to a distribution channel. AI is also a central part of our strategy and is infused across our platform. A great example is Canon USA working with is Canon USA.

Speaker 5

Working with GreenLake Consulting, Canon has built an automation program that leverages document understanding and customized machine learning models to process over 5,000 invoices each month. Automation gives them greater accuracy and efficiency and requires far less need for human interaction, saving their employees over 6,000 hours of manual work annually. Our dollar based net retention rate for the quarter was 120 2%. Normalizing for FX, our dollar based net retention rate was 127%. Dollar based gross retention of 97% continues to be best in class.

Speaker 5

Revenue grew to $290,000,000 Normalizing for the FX headwind of approximately $7,000,000 revenue grew 21%. Remaining performance obligations increased to $904,000,000 up 34% year over year. FX adjusted RPO was $891,000,000 Current RPO increased to $559,000,000 Turning to expenses. We delivered a strong first quarter total gross margin of 87%. Software gross margin was 93%.

Speaker 5

1st quarter operating expenses were $205,000,000 reflecting disciplined cost control. We continue to find opportunities to optimize the business, which allows us to both reinvest in growth and increase profitability. We have built a strong foundation to scale the company and will continue to leverage automation and improve operational excellence to grow the business efficiently. Before I move on, please note the year over year decrease in G and A reflects both cost efficiencies as well as a reallocation of software expense to other line items. GAAP operating loss of $46,000,000 included $85,000,000 of stock based compensation expense.

Speaker 5

Non GAAP operating income was $48,000,000 resulting in a record first quarter operating margin of 17%. The combination performance and disciplined expense management resulted in record 1st quarter non GAAP adjusted free cash flow of $73,000,000 I am very pleased with this achievement and we expect to be non GAAP adjusted free cash flow positive every quarter for the remainder of the year. We also have a strong balance sheet, which is an important asset in the current operating environment with $1,800,000,000 in cash, Cash equivalents and marketable securities and no debt. Now let me turn to guidance, which assumes the overall macroeconomic environment continues variable, including in North America and that we are in the midst of executing our new go to market strategy, which includes account segmentation and the transition of smaller customers to distribution partners. For the fiscal Q2 2024, We expect ARR in the range of $1,301,000,000 to $1,306,000,000 Revenue in the range of $279,000,000 to $284,000,000 non GAAP operating income to $10,000,000 and we expect 2nd quarter basic share count to be approximately 563,000,000 shares.

Speaker 5

For the fiscal full year 2024, we expect ARR in the range of $1,427,000,000 to $1,432,000,000 revenue in the range of $1,267,000,000 to $1,272,000,000 non GAAP operating income to be approximately $168,000,000 This translates to a non GAAP operating margin of 13%, a 700 basis point increase year over year. Before I close, I want to leave you a few final details. First, given our Q1 gross margin outperformance, We now expect gross margin for fiscal year 2024 to be 85%. And finally, we were 13% adjusted free cash flow margin. Looking forward, the team remains focused on delivering growth at scale in a disciplined manner, which allows us to both invest in extending our market leadership while expanding operating margin and increasing adjusted free cash flow.

Speaker 5

Thank you for joining us today and we look forward to speaking with many of you during the quarter. With that, I will now turn the call over to the operator. Operator, please poll for questions.

Operator

Thank you. And ladies and gentlemen, at this time, we will conduct our question and answer session. Our first question comes from Terry Tillman with Truist Securities. Please state your question.

Speaker 6

Hey, this is Joe Meres on for Terry. Thanks for taking the questions. I appreciate it. So you recently announced your new business automation platform with Sounds like a big deal to us. Can you just explain what drove the decision to make this integration and what you think the opportunity is here?

Speaker 2

Hey, Terry. This is Robert here. Thank you for the question. Look, I'm here in Barcelona with many of SAP's customers, and it's It's actually exciting event for us. We were key sponsors in both Orlando, Barcelona and Sao Paulo.

Speaker 2

I think They said in terms of the customer, a large global apparel footwear company this morning in Barcelona mentioned why The partnership for them is important and it's basically around the ability to migrate to S4HANA, drive a clean core, Accelerate their digital transformation combining some of SAP's technologies around Signavio, which is process modeling, connected with our UiPath task mining And driving off the UiPath platform. Together, that global footwear apparel company He's working with robots over a couple of 1000 hours with the SAP system and seeing significant benefit, together with Customers wanting to move faster, customers wanting to actually see how automation on top of their existing environments, whether they're actually going to go through digital transformation And we believe that our go to market organizations on both sides will be able to deliver the value to these customers much, much faster. So It's a significant partnership. The feedback we've got from Global Systems Integrators has been exceptionally positive. We've mentioned a couple of them and we've had a lot of positive inbound interest in this partnership with SAP.

Speaker 2

Together today, we also have customers that already utilize it in the test suite, the capabilities we have. You can see as we've mentioned Previously with Arik and the benefits based part of it. So we think at the end of the day, customers are going to see significant benefits of higher By connecting ERP systems, world class mission critical ERP systems together with world class automation systems.

Speaker 6

Super helpful. And then just as a follow-up, we recently saw UiPath product administration that used ChatTBT to come up with test scenarios for the test suite. It seems very additive to the platform. Can you just explain at a high level how ChatTBT augments the product and then what your product does that ChatTBT cannot do? Thanks so much.

Speaker 3

I'm very excited about the opportunities that generative AI is going to bring to our platform. We are seeing a good opportunity to increase the adoption of our platform by making the existing use cases Easier to implement and democratizing access to the platform in the sense that even More and more or less technical users can use it. We are building as part of this project called Wingman. We are building a copilot like technology where users can specify in natural language What is the task they want to automate? And we use our computer vision To read application screens and by combining our own technology with the cognitive power of Chad GPT, we can actually create very easy to use workflows that Can be deployed and run by our platform.

Speaker 3

Moreover, we feel that in our document understanding business, We can accelerate the creation of domain specific models by training them using generative AI, But then deploy them in a secure and governed matter. So this domain specific models have the advantage that they are very precise And they don't hallucinate and they don't pose business risks. And you mentioned testing. Exploratively, Testing was very difficult traditionally to automate because people iterate very fast Through building an application and user interface usually change quite a lot. But now we see the opportunity to have a Description of the tests in pure English like you do for the manual testers and then by our automation platform that Employees computer vision and generative AI will simply explore the user interface and will be capable Understanding an application and testing more like a human user.

Speaker 3

That will result in an acceleration Actually implementing a large application because people will test much more often. So development cycles will shorten. So all in once, we believe this is an amazing opportunity for our platform. And I want to stress again that the power of it really puts To highlight the power of our computer vision that reads screens, the power of our execution platform that can execute Screen through applications and the power of our end to end platform that can orchestrate and deliver automation in an enterprise grade

Speaker 6

Thanks so much.

Operator

Our next question comes from Raymond Lenshaw with Barclays. Please state your question.

Speaker 7

Thank you and congrats for another solid quarter guys. I wanted to stay on that testing theme and actually also the SAP theme from the first question. And thinking about like testing in an SAP migration environment, because like as a lot of customers have to go to S4HANA, as a lot of Customers need to redo and rethink their customizations, etcetera. Should that not be like a significant opportunity for you guys around Testing there and work there. And am I dreaming here?

Speaker 7

Or do you see that? And what's the opportunity there? And I have one follow-up, Pershing.

Speaker 2

Yes, Raimo, it's Robert here. Now when we mentioned the ARIKA test suite Announcement earlier, that is in a combination with the S400 migration that they're doing. So we're an integral part of that migration. It was also Automation on top of S4HANA migration with TESI. So we actually have customers today that are actually utilizing significant parts of Both platforms.

Speaker 2

And the opportunity is significant because it also ties in SAP's BTP platform Together with AS4 migration. So that's why we feel really confident about it. We also feel like it changes the discussion in front of customers And it drives a significant amount of efficiency in the migration process as well. We've also Delivered SAP Heat Maps and SAP Solution Accelerators to help move that motion even faster. So we do see that as a significant opportunity with our partner SAP.

Speaker 7

Yes. Okay, perfect. Makes sense. And then, Ashim, great results on cost control and what you're doing there. How do you think about your cadence investment cadence there for the reminder of the year in terms of Kind of controlling costs, but also kind of getting ready for in case things are kind of looking better in the second half of the year with the view on 2024.

Speaker 7

Like how do you kind of run the business at the moment, many things?

Speaker 5

Yes, I think first is we will consistently invest in areas that we see opportunity, Raimo, that is both in the go to market side as well as in product. And you can see that in the results of the roadmap that Daniel talked about in the product And the excitement that we have there and things like and deals like the SAP partnership that happen Through the investment of time of our resources. So we focus people in the right places with the highest return. We've talked about it. I think we have enough scale now where A big chunk of our base is really scalable globally.

Speaker 5

You look at our G and A structure, I think we've built the foundation to scale across every single country and support The customers and the strategy that's in place today. And on the go to market side, Rob brings a ton of expertise and the leadership of the go to market Teams really are constantly looking for the best opportunity and focusing on customers with the highest propensity to invest Automatically leads to better ROIs in terms of the investments we put in. So while I think that we will continue to operate the company efficiently, That efficiently for us means investing in great opportunities and deemphasizing areas where we don't and that formula I think has shown positive results You can see not just the generation of free cash flow, but also us raising our overall operating margin guidance here to 13% for the remainder of the year.

Speaker 7

Yes. Okay. Makes sense. Hold on. Thank you.

Operator

Our next question comes from Matthew Hedberg with RBC.

Speaker 8

Rob, maybe I'll start with you. Up selling the platform beyond RPA It's clearly a big opportunity for you guys. And when we look at your growth in large customers, it seems like it's showing up there. Can you talk about a little bit more about the success You're seeing there moving customers beyond RPA to the broader platform. And what does that do to ARR per customer?

Speaker 2

Yes. Maybe Hashim will also comment on the ARR per customer. But for certain, when you look at our customers above 1,000,000 That's improving all the time. I would say, Matt, the discussions we're having with customers today using our NorthStar model It's significant. It's really around how we can help their businesses, how we can help drive efficiency and how we can help them Deal with this environment that we're working in today.

Speaker 2

So we see lots of opportunity on that. I think Daniel mentioned document Planning the return on document, understanding the results that we have with customers today in healthcare, healthcare providers and financial institutions It's absolutely significant and we're seeing more and more customers expand. And then as customers start to see areas that they Yes. I would say, when we engage in a sales cycle and we're going with Test Suite and they look at the full platform, We're seeing more and more customers select us because of the platform, the opportunity that it provides. So I would say RPA and automation today, The enterprise version the way the companies look at enterprise automation, UiPath is clearly the leader in that space.

Speaker 2

The partnerships that we Now I've got in place with big GSIs and big technical partners is making a big difference. And I'm very confident of where we're headed With our focus on industries and these partnerships.

Speaker 8

Great. Thanks. And maybe just, Ashin, following on Raimo's question on margins, obviously, super impressive, 9.5% to now 13% for the year. You're just sort of curious like when we think about that longer term margin progression, how should

Speaker 9

we think about the cadence beyond

Speaker 8

this year, which has obviously been pretty dramatic

Speaker 5

Yes. I think we're really pleased with the progress and the pace of execution by every single employee of UiPath frankly Working to both serve our customers and fight efficiencies together. We've talked about 20% Margin, in terms of a long term operating margin goal, we'll update that at the appropriate time as we see the need to. But We're more than halfway there. We feel really good about that progress.

Speaker 5

We're committed to being a rule of 40 company. And I think just continuing that progress is what we're focused on.

Speaker 2

Thank you very much.

Operator

Thank you. And our next question comes from Mark Murphy with JPMorgan. Please state your question.

Speaker 10

Hey, this is Artie on for Mark Murphy. Thanks for taking the question. I wanted to ask, is there any material portion of your pipeline where you I didn't feel like you're being involved in generative AI and LMs with external products. To be clear, I understand you guys have your own AI and ML products, Specifically, if you're kind of seeing any incremental pipeline with adoption of these kind of emerging LOMs? Thanks.

Speaker 5

I don't think we look at our pipeline In that vein, when we go around and Rob can talk through the customer portion and the customer stories, Every customer's in our pipeline reflects the continued interest and understanding that automation and AI go hand in hand And the power of generative AI really makes us the right long term fit for their platform. So we see that in the pipeline in terms of just The continued throughput of the deals and the deals with our largest customers reflecting our strategy. So that's the way we see it. Do we have a specific set of pipeline or deals just around AI? We don't look at it that way.

Speaker 5

And I don't believe our customers do either. Yes, I would just add to that.

Speaker 2

Let me just add to that because I think it's really important and I think in Daniel's Prepared remarks, I thought it came across really well. Look, when you look at the way we look at enterprise AI and we are getting significant amount of discussions with our customers, You have to go back to domain specific AI. In domain specific AI, we've had years, years of work in this space that our customers, whether it Toss mining, document understanding, our computer vision technology and don't forget communication mining as well. So we've got years of understanding in that. We spoke about clipboard AI previously on generative AI.

Speaker 2

The customers really want to understand how We can benefit them in the future with automation and how these 2 go hand in hand. And I think that's going to be something that UiPath will It will continue to evolve really, really fast in the next month. And I would believe that we are seen as a leader in a thought leader in the space as well. I mean, Daniel, do you want to make Some comments on that?

Speaker 3

Yes. As I said, it's I really believe that from a strategic standpoint, AI development will follow a bit like Our human brain development. We have a very powerful cognitive engine, but we have a lot of specialized Models, if I can say so, that help us to do many tasks on autopilot. For instance, if I want to try to learn tennis, Initially, I'm training using my cognitive, I'm understanding the game, but then I will play on autopilot because it's much more effective, it's more precise, It's actually much less intensive in terms of resources that it requires. So obviously, this is going to be the model That will prevail in the enterprise world.

Speaker 3

And this is why I believe we have an Extensive mode here with based on our computer vision technology and actually our ability to execute actions on screens, Which is a very hard thing to do reliably. So it's part of our IP for the Last 15 years. In a way, I really believe that generative AI, it's exactly the missing piece For RPA to really go to the next level of adoption.

Speaker 10

Got it. That was a very insightful and thoughtful answer from all of you. So I'll just leave it at that. Thank you.

Speaker 7

Thank you.

Operator

And our next question comes from Keith Weiss with Morgan Stanley. Please state your question.

Speaker 9

Yes. This is Sanjit Singh for Keith Weiss. I wanted to start first with Ashim. In terms of the demand environment, You guys talked about sustained deal scrutiny similar to last quarter. As you looked into the trends in May and Looking to the pipeline for the rest of the year, how are like what is sort of the customer buying behavior?

Speaker 9

How is that shaping up? Any sort of changes you've seen in May versus what you've seen in Q1 and what you saw in Q4?

Speaker 5

No, I think it reflects just The way that we've described it, which is it reflects the variability of the macroeconomic environment. That I think goes Changes every single day and we're attuned to that with our customers. But there's no consistent change that we see a major difference in from that perspective.

Speaker 9

Is there any sort of regional variation? There's been some inklings that Europe Might be doing better than U. S. And then Asia or is it still pretty volatile across

Speaker 2

the various geos? So

Speaker 5

just in terms of what I see and I'll let Rob comment as he's been with the customers. But from a pipeline perspective, we're really pleased with the execution within across our teams. I think the word variable really is a global Phenomenon in terms of the overall environment.

Speaker 9

I think you're in the

Speaker 5

fall process for a longer period of time, Just since last year and I think North America is something we commented on in the last earnings call. So from that Those are just the dynamics and I'd say that's pretty consistent. Nothing else that I would highlight. Rob, I don't know if you want to add on to that.

Speaker 9

No, I paused

Speaker 2

on that one. I didn't I don't think there's much to highlight. I would Say that it's consistently variable. I would say the same discussions taking place with customers when you talk about our North Star model and Where we speaking to customers about the broader automation platform is progressing very nicely in both the U. S.

Speaker 2

Or the Americas and In EMEA, we're pretty pleased with the progress there and we will continue to work on the progress in APJ. But Market conditions, I would say, are variable consistently.

Speaker 9

Understood. And then I could sneak one last one, if I may, for Daniel. You've been pretty clear about on this call about the potential for Generate Avai to help make RPA more useful. Testing seems like a very interesting use case as well as customer service. What does that mean from a pricing So as you guys incorporate this technology, do you feel like you were you'd be able to press on the pricing lever given the potential productivity enhancements that you may extract or deliver to customers?

Speaker 3

Yes. This is a big tailwind for us. And it's going to Positively impact all areas of our platform, because ultimately we will infuse generative across our platform. And this basically will with the increased adoption of our technology, I think the technology the generative AI would pay in a way for itself. And we will sell more robots, we will sell more documents processing, we will sell more AI units.

Speaker 3

So I think it's going to reflect pretty nicely into our existing price model.

Speaker 9

I appreciate the thoughts, Daniel. Thank you so much.

Operator

Our next question comes from Bryan Bergin with TD Cowen. Please state your question.

Speaker 11

Hey guys, good afternoon. Thanks. I wanted to follow-up on the go to market refresh. Robbie But can you dig in a little bit more on the sales and the go to market reorg across the 3 operating regions, really just compare and contrast where you stand in North America This is EMEA versus APAC?

Speaker 2

Yes. Look, I mean, I think we've executed the go to market changes As we said, we would consistently, those changes, I would say, has settled down Really well, mostly in some of the segments. It's taken a little longer than we would have hoped. But Right now, I feel really good about where we are and the rhythm we have in the second quarter and how the teams are focused. So Absolutely the right decision, absolutely the right execution.

Speaker 2

And as you said a couple of times, Brian, I think you'll see the Acceleration in the second half of the year due to the changes we've implemented.

Speaker 11

Okay. And then just on the partnership ecosystem, kind of same question here. Just any feedback from the service channel partners As you're shifting some of the long tail over to them, any learnings thus far on this plan?

Speaker 2

Yes. I would say the partners across the board, You've got to look at the partners. If you look at the big GSIs, I think we're having way more discussions with them. They're very much involved in many of our North Star discussions around digital transformation, big projects. For them that model fits really well.

Speaker 2

Our existing partners, the local channel partners are seeing Bigger opportunities as we continue to showcase the platform. They get fundamentally Understand how you position the platform and actually even in some of those partners we see areas like document understanding where they're actually really driving it. And then the distribution is where we still got some, I wouldn't say work to do, but we still got to see it come through. And look, reaction, I mean, that's the one probably that we don't mention because maybe it's not as global, but the partnership T Systems with large companies in Germany, Switzerland and Austria and the public Sector in Germany is significant, right. We're already working with Deutsche Land ticket, which is Deutsche Bahn On their flat rate ticket system for the whole of Germany.

Speaker 2

So that's a big significant opportunity For UiPath as well. And then the SAP partnership coming out of Sapphire will be in full execution mode and we're really confident that The senior leadership of SAP being here in Barcelona being on stage tomorrow with the SAP team and their customers We'll showcase the fundamental difference of that partnership as well.

Speaker 11

Okay, good to hear. Thank you.

Operator

Our next question comes from Michael Turrin with Wells Fargo. Please state your question.

Speaker 12

Hi, this is Asu Mohan is off for Michael Turrin. Thanks for taking our question. It looks like net new ARR was down versus last year in the quarter. Is there any additional color that you can add on whether it's new logos or expansions that are impacting that? And as a follow-up, are you seeing any change in the average deal sizes for new lands?

Speaker 5

Yes. So just when you look at it, I wouldn't say there's a driver between new logos and expansion. Really, first thing is Normalizing for FX, FX had a $5,000,000 $6,000,000 impact in the quarter. So I think that's The first piece. And the second is it's more of a just a general the broader macroeconomic variability that we see and the transition that we have in terms of the go The market changes that we've made and that's appropriate.

Speaker 5

We commented on that at the start of the quarter. So those are really the drivers versus pointing out a specific motion in terms of where it is. In terms of land sizes, we're really pleased with What segmentation has done in terms of focusing on the higher propensity customers, we see we're pleased with our large deal Execution, Rob mentioned this, our $1,000,000 plus customers continue to grow. And from that standpoint, I think that's a good feeling from us in terms of both positioning the platform as well as larger deal execution, which of course involves average selling price being higher.

Speaker 7

Got it. Thank you.

Operator

Our next question comes from Brad Sills with Bank of America Securities. Please state your question.

Speaker 13

Great. Thank you. I wanted to ask a question around The transition to solution selling and the vertical approach here, I think last quarter you called out some relative strength in the financials vertical. Just curious if we can get an update on where you might be seeing some traction across the verticals with that approach? Thank you.

Speaker 2

Yes. Brad, I mean, we still continue to see the benefits with The financial sector, banking, healthcare providers, we still see continue to see that. We announced a couple of names. So that continues to be a source of strength, especially with the solution products like communication mining And document understanding. But I would say it's variable in other industries, in generic manufacturing, You see test suite being driven.

Speaker 2

So from industry point of view, I think over time, As we produce more and more solution accelerators, as we get more and more focused on which solutions fit which industries, You're going to see the expansion by industry. The piece at ease significant as well as that the global system integrators, the big partners actually want to work with us In specific industry focus areas and you're going to start to see that expand in the coming months as well. So I wouldn't say specifically We saw significant uptake in any particular industry in the Q1, but still financial services, healthcare Still the areas where we see that we have seen progress.

Speaker 13

Wonderful. Thank you so much. And one more, if I may, just on Couple of partnerships here, the Amazon SageMaker and Snowflake partnership. How do you envision these partnerships impacting the business? Are we talking about Just more relevance by blending data from these data sets and AIML libraries To increase the velocity of deployment of more bots, the accuracy of bots, I mean, how do you see this Impacting the business as you bring in data set from Snowflake and the AIML library from AWS SageMaker?

Speaker 13

Thank you.

Speaker 2

Yes. Well, Daniel, you can take the SageMaker 1 off Snowflake. I think it's pretty clear, Brad, that it just helps customers automate Fast to connect quicker to Snowflake data in the manufacturing sector and deploy bots much, much faster. Actually, we see quite a Significant amount at the Sapphire event that we're in. We see significant amount of customers in that space, manufacturing, Wanting to understand more about not the Snowflake partnership, but how they can actually deploy bots in manufacturing supply chain logistics Much faster.

Speaker 2

So we see that as a significant opportunity as well.

Speaker 3

Yes, obviously. I think Great opportunity in our analytics platform. We use Snowflake as actually a foundation layer in Process mining and all our analytics, we kind of standardize on the platform and we use the power of it. And of course, SageMaker is great for hosting models. It's to accelerate our AI strategy.

Speaker 3

So all in one, It's a really positive event for us.

Speaker 13

Thank you so much.

Operator

Our next question comes from Kingsley Crane with Canaccord Genuity. Please state your question.

Speaker 14

Hi, guys. This is Gabriel Rode for Kingsley. Congratulations on the quarter. I find it very fascinating about the Generally, they have been a great gateway to leverage the rest of the automation platforms. In that respect, what impact do you guys Taking into account for the guidance for this year or for longer term of generated EBITDA and the adoption of the platform overall Increasing.

Speaker 14

Thanks to it.

Speaker 3

Well, I think generative way, it's a bit of a longer shot To have impacted the guiding for this year. My estimation is The real adoption in the enterprise would probably start more like next year rather than this

Operator

Our next question comes from Scott Berg with Needham. Please state your question.

Speaker 12

Hi, everyone. Congrats on a good quarter. Most of my questions have been marginally asked, but I just wanted to ask for 1 and apologize for the background noise on the plane here. But my question is on the adoption of your native cloud bots. I think they've been in the market for a little bit more than a year now.

Speaker 12

Just wanted to see if you had an update maybe on the attraction of Telenem versus the more traditional term license spots that you

Speaker 9

have out there?

Speaker 11

Thank you.

Speaker 5

We see really good overall progress in our hybrid offering, I think is really good. I think ACR, it's still early. Like there's a lot of our customers will still work and are developing their cloud strategies, their Full cloud strategies across enterprise automation, but the feedback from our customers, the interest continues to be very well and it's positioned well in the market. But our having that on the roadmap coupled with the capabilities that continue to be released on our cloud platform, We feel very good about that.

Operator

Thank you. And we have reached the end of the question and answer session. I'll now hand the floor back to Robert and for closing remarks.

Speaker 2

Yes. Thank you everybody for joining us. We look forward to connecting with many of you in the coming weeks And we appreciate you all joining us today. Thank you.

Operator

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.

Remove Ads
Powered by Quartr
Earnings Conference Call
UiPath Q1 2024
00:00 / 00:00
Remove Ads