William Blair 44th Annual Growth Stock Conference – UiPath Inc. (PATH) (Transcript)

William Blair 44th  Annual Robert William Blair Cheers. Thanks to everyone who joined online via the webcast as well as in person in the room. First off, I go by Jake Roberge. Here at William Blair, I oversee UiPath as a research analyst. And go to williamblair.com to see a complete list of our research disclosures.
Having said that, we are quite delighted to have As him Gupta, the Chief Financial Officer of Hipbath, here with us today. We’re going to dive a little bit deeper into the business with Ishim’s fireside chat after he presents a few slides to kind of level set with everyone in the room. As him, though, deserves our gratitude for coming today.

William Blair 44th  Hi Jake, many thanks. Greetings to one and everyone. Ishim Gupta here, and like Jake mentioned, I’ve been with the company for more than six years in a variety of roles—not necessarily in finance. And it was as a customer that I actually joined the organization. So I was the — I was the CIO and CFO at General Electric, GE, where this was the top ROI technology, and I fell in love. I joined the company in that way.

Thus, allow me to start. What, then, are the Hipbath numbers that one may quickly glance at? These are first quarter figures; $335 million in revenue, $1.5 billion in ARR (almost $1.5 billion), and a non-GAAP operating margin of $50 million, which was accompanied by over $100 million in cash flow. We were less than $50 million when I came, more than six years ago, so even if our company is incredibly fit for the product market, we are a scaled company.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)


William Blair 44th Annual We now have the business at $1.5 billion in ARR. And now that we have brought the business to a very healthy, long-term level of profitability, we even see that there is still room to improve efficiency while maintaining our leadership position and expanding.

For the first quarter, we saw a 16% sales growth rate. We follow 606 accounting and have both on premise and cloud software as well as SaaS software. Those of you who have gone through it are aware that the revenue differs somewhat from the straight ratability.

As such, we constantly remind folks of the $1.5 billion ARR figure, which is expanding by 21%. When you consider 11,000 clients, 288 are worth more than $1 million, and more than 2,000 are worth more than $100,000. So it is very broad based growth and a broad based basis, with high levels of profitability, while we keep investing in AI and expanding our platform.

What then is this platform we discuss? We had RPA when I started working for the company. For those who are unfamiliar with robotic process automation, or RPA, software emulates manual labor. So, rather than you or your employees inputting an invoice into a computer, they are actually freed up to tackle increasingly difficult issues.

I will now walk you through a basic invoice processing scenario. But our RPA technology works with every industry, handling extremely intricate tasks like claims processing, customs integration, and customs procedures, all the way to interactive areas like call centers for big banks and inside their whole banking operation.

William Blair 44th Annual But that’s hardly the surface of what our platform offers. Both inorganically and organically, we have grown the platform to include discovery within the past six years. We are a leading — we have been ranked with analysts in the leader quadrant around process mining as well—and we have the capability for individuals who are familiar with Colonies for process mining or discovery. Actually, we sit as agents on desktops and execute task mining. So we may examine what people are doing with their time. Process mining notes, “Wow, this is nonstandard or this is manual,” based on the records of labor or transactions. We have thus moved into discovery.

Apart from citizen development, where you will see something like a Microsoft, our automation suite actually has extensive automation with our unattended platform. That implies that there are agents or robots sitting in the background performing intricate jobs. And we serve the citizen developer persona in addition to the professional developer one.

Furthermore, Autopilot now has an embedded creative AI integrated in. Microsoft implements such in Copilot. That is the approach we take with our Autopilot platform, which lowers the obstacles to genuinely introducing sophisticated automations into the system.

Then we assist with business operations. Apart from the scope of our platform, I believe that Hipbath’s main distinction is our governance. You have a lot of compliance to do whether you work in manufacturing, banking, or health care. Financial side Sarbanes-Oxley; regulatory and patient information HIPAA.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)

William Blair 44th Annual Thus we make it possible for the government to run. That implies real-time analytics; it also means ensuring that we have the appropriate AI trust layers in place to take use of our AI capabilities and to govern the digital workforce we are supplying. We therefore have the largest platform available when you combine AI, API automation, UI automation, and RPA, which is what gives us our competitive position both at scale and in analyst reports.

In this AI universe, where have we used AI, then? If you ever get to meet our creator, Daniel Dines, I would say that authenticity is the most often used adjective. And I believe that we are genuinely integrating AI into our products in the context of hype cycles.

Where therefore do we carry it out? Parts of our discovery suite, to give you an example, are communications mining. That means what? That implies that you can learn what individuals are doing in a company by consuming all of the millions and billions of emails. Thus, artificial intelligence (AI) can be used to comprehend data passing through emails, enabling you to begin automating routing and categorizing of that.

Our automation itself uses AI to perceive a screen as computer vision. Going into a multi-—one of the biggest banks in the top 10 largest banks in the world and seeing how every screen within their application stack, a human [indiscernible], that is artificial intelligence applied, not screen scraping. The Autopilot I discussed generates code using common expression.

That is another place we work. Finally, we actually use AI to help knowledge workers and employees free themselves up from repetitive chores. Thus, we empower business users and regular knowledge workers inside a firm with AI in addition to professional developers.

Nothing of this occurs by a single or direct concentration. Partners inside our ecosystem are therefore perhaps our most important resource. Consequently, we have $1.5 billion in ARR. With 11,000 clients, our partners and alliances are the next important component. On the screen are our tech partners. Actually, our relationship with Microsoft is among the strongest.

We are the chosen automation vendor that they refer to their clients. Among all the other logos you see there are those from AWS and Google, with whom we are tightly linked. Because UiPath goes beyond automating a single action or screen, those integrations are essential for us and for our clients. It has to do with truly automating throughout the screen and stack.
William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)
William Blair 44th Annual Implementation done correctly comes last. Because GSIs are in the vanguard of selling transformation and are aware of the potential of our platform, they are part of our go-to-market partnerships. So if you look at Wisconsin Energy, which we will discuss in a few areas, they use — Accenture brought our platform to them to combine providers under one vendor that could handle anything from traditional automation to document processing to test automation. Considering that, our collaborations are therefore quite important to us. They are very important to our clients and highly appreciated by all of the big GSIs operating there.

So overall, if you look at our firm, ARR growing 18% or 20+%, sitting down with great cash flow, strong cash flow margins, really incredible gross margins at 85+%. We have a very scalable company that is still growing in a period where productivity is the top priority for all businesses.

I shall thus settle down and strike up a chat after that.
Roundtable Discussion
Question – Jake Roberge
Sounds fantastic. Okay, Ashim, many thanks. I value your level setting with us there and your brief overview. Just to start the conversation here, though. One of the current trends in the automation industry is simply the desire of clients to combine tools onto larger platforms. There you outlined your product portfolio for discover, automate, orchestrate, or optimize.

What motivates the desire to combine on the larger platforms? How does that alter your market competitive positioning, by the way?

The Gupta brothers Actually. I’ll just state up front that we benefit from vendor consolidation. There are very few vendors who can find, automate, and run — just look at analyst reports or Google. Hipbath is the only provider that offers both document processing and test automation. To us, then, the vendor consolidation is a boon. Two things, now, are what motivate a buyer. One is that they naturally get a simpler tech stack to work with, which in the realm of data integrations and security is better and more capable and more affordable for clients the simpler the stack.

Vendor consolidation matters secondly because integration is crucial. We developed our platform because you need to be able to locate automation; if you could merely automate, you would have to purchase that product and work out how to integrate it.

That integration, we resolve. Thus, we may achieve for our clients one plus one equals three. And you can observe that in several places. Etihad Airlines purchased our whole platform, so to speak. They combined so they had all the components of our platform operating over 300 processes, which demonstrates the kind of value the platform offers to our clients as well.

The Ruberg brothers That is, in fact, useful. And then there are some; you mentioned the logos associated with AWS and Microsoft, two of those bigger suppliers. Larger software companies are attempting to take advantage of the automation potential with Microsoft and Service Now, though. Perhaps explain to us the functional swim lanes between your platform and the actions of those vendors.

The Gupta brothers Awesome query. So when you examine — let’s simply look at Service Now and Microsoft. Microsoft is essentially about individual productivity. So just consider a company, excluding the cloud. What do they utilize, if invoice to cash, procure to pay, record to report, staff onboarding, et cetera, is a real corporate process? Microsoft essentially resides in the personal productivity space and is there to stay. Do we spot them in that swimming lane? Sure, as our platform includes components for personal productivity. But our customers appreciate our level of enterprise-grade automation the most.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)

William Blair 44th Annual More than a line of business tool, Service Now is an IT tool. They are, however, mostly focused on longer-running processes, which is where we are pushing capability. Still, they lack the agility to handle the myriad of use cases that a customer has. Therefore, when we consider customs and the amount of processing required to get manufacturing components through export regulations and customs processing, you need a degree of agility to be able to really automate that process, if you think about a company like where I came at GE.

ServiceNow therefore truly concentrates more on that IT swim-lane than on the existing line of business users. And you can see that they scale really well, taking ITSM as an example. However, our typical client uses their region for thousands or hundreds of use cases. We truly are in that automation of enterprise grade. That’s what we do for living. The bulk of our income is made there.

The Ruberg brothers That is, in fact, useful. They have RPA technology, so just double-clicking into the Microsoft relationship—but they also have a pretty close cooperation. Could you therefore perhaps clarify the nature of that cooperative dynamic? And in what precise way does that operate in the market?

Asish Gupta

It appeals. Actually, this is probably where I’ll start and finish. Satya remains on stage — Satya Nadella remains on stage with the UiPath logo in the backdrop. As our cloud platform is built on Azure, we are therefore among their biggest users of the platform. Microsoft therefore gains from every dollar or automation that runs on our platform in terms of their cloud utilization; they are aware of this and can see it. They included us in their market place for this reason. That’s the reason our partnership exists and they promote us to a lot of clients.

The second aspect is that Microsoft has deemed us their chosen enterprise automation partner after evaluating our enterprise-grade capabilities. Where Microsoft, so to speak, competes or where we — kind of the coopetition enters the phase, the first part is true partnership is really just around the personal productivity side, which is an important element of our platform, but it is not the larger revenue producing element of our platform. When you combine that, that’s essentially how we work together and compete with Microsoft at the same time.

Again, you can see that collaboration really shine in terms of how they highlight us and how we highlight them in their presentations. We are connected at the top levels of Microsoft, whether it is Scott Guthrie, et cetera, Satyr.

Mike Ruberg Actually. That seems useful. Then, just in terms of the platforms, you’ve kind of been branching out from RPA over the past several years into process mining, document comprehension, and test suites. Could you discuss the level of acceptance for those other items? And just roughly what success indicators for those products should investors be looking at?

The Gupta brothers Sure, things are going fantastically. Let me to present you with a few facts. I will try to provide you two facts. One is most of our clients above $100,000 have some combination of our entire platform, including more than just RPA. Thus, we have more than 2,090 clients who are worth more than $100,000. Now, they have all either started at scale or with several components of our platform. IDP alone is my second example. We reported in the fourth quarter that of our top 100 clients or 100 deals during the quarter, 65 of them included intelligent document processing, or IDP.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)

William Blair 44th Annual Hence its acceptance. We like that many of these components scale as well as or better than RPA. Give it some thought. At our TOGETHER event in Washington, DC, the IRS commissioner joined us on stage since they recognize the importance of the volume of paper that the government handles. As it happens, the government is overflowing with paperwork. They’re itching to automate that. We’ve therefore moved on with our initial set of use cases, and there are yet more in the works. It’s also interesting because, once you’re in one use case with IDP, it just scales because businesses are only producing more documents.

Then there are the really excellent test automation examples, such as Orica in Australia or other clients who have fully embraced our technology. They’re beginning to realize that you can automate your application testing by using the same database of process understanding that you use to run processes through your system. They have to be careful not to break a process each time they modify code. You can run automatic scripts—some people are doing it using Hipbath—or manually test it.

Robert Ruberg Actually. I find that useful. Then maybe just diving right into some of the most recent findings. There’s a little commotion in Q1. Would you perhaps just go over the main events of the quarter, some of the current dynamics you’ve observed in the company, and how things have evolved over the last few quarters?

Asish Gupta

Naturally. We expressed our dissatisfaction with the results of our Q1 on the earnings call, so I believe that speaks for itself. We fulfilled our revenue target and came inside the net new ARR target. Simultaneously, when we examined Q1, we particularly underlined two aspects. The macroeconomic setting makes up the first area.

We are not, I believe, the only ones experiencing it. Looking at kind of Q1 earnings across several people highlighted somewhere around that mid-March time range. Deal cycles seemed to be getting longer and the atmosphere harder. That is, I believe, more about the environment that our clients are working in than it is about UiPath. And we seen its effects, especially in relation to the bigger multi-year agreements.

The second part concerned a few important executional aspects. Without going over them all, let me just say that we feel that we could have gone into more depth on a lot of them, including our deals and some of the scrutiny surrounding them as well as the change management regarding straightforward procedures like sales compensation and just making sure we understood the repercussions. Essentially, what we agreed to on that call was three things: first, we should make sure that, considering the circumstances, the guideline is adjusted appropriately.

We therefore have, in my opinion, a pretty solid foundation for operating the company, considering the current state of affairs and a few of the changes we are undergoing.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)

William Blair 44th Annual Quick fixes on execution make up the second part. Fixed already is the effect on sales compensation. We are sticking to our commitment to address that in the quarter. And then there is more of it, which Daniel will be addressing as CEO, which is resolving those more complex go-to-market execution issues by just getting closer to the consumer. I believe we can expedite the information chain since we created far too many central organizations that slowed it down.

The Ruberg brothers Indeed, that is useful. Maybe just going into the ongoing CEO change by double clicking. Just clarify things for us a little bit better. And as Daniel returns to the CEO post, what are some of his top priorities?

The Gupta brothers

Most definitely. Rob was our CEO, and he resigned for private reasons. Just as you double click, I was discussing it with a few investors this morning. For seventeen years, Daniel has headed the business. I take it he expanded the business from zero to one billion dollars? He therefore enters the company having not been absent. It was only that he was more concentrated on the P&E side of things. Daniel has so truly highlighted a few important points when he enters the picture. The first is genuinely going back to the smaller company’s agility.

Sometimes, when you grow, you begin to believe that in order to fit into the big company model, you need deeper, more involved procedures. It really is quite the reverse. And I believe there is economic efficiency potential in breaking down those silos we established. However, it also brings us closer to the field and the consumer, enabling us to respond and develop a more in-depth plan. The second component is merely ensuring that the product and go-to-market divisions are more integrated and really hammering down on the execution front. And I think that if we do those two things, I have a pretty optimistic outlook on our future.

Mike Ruberg It is useful, yes. Just one last item about the kind of current performance and the current demand climate. You indicated that certain expansion investments might not be working out as well as you had anticipated. Though you’re already at a respectable profitability profile, how do you keep pushing that from — to sort of right size them to keep driving leverage in the model?

Gupta, As him Sure. I believe that the instant you put the client and innovation first, waste kind of like highlights itself. And I believe that the investments that have been developed over the past year or two have a similar pattern of paying that we are not happy with from a ROI perspective. In actuality, it’s the main organization. The companies located the farthest from the client. How about their appearance? Talk in terms of playbooks. You use terminology like that, initiatives and program management, right. And there are other instances where we could just be more dexterous. For a straightforward choice, five persons are not necessary.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)

William Blair 44th Annual And so, I believe, those are the kinds of investments. And we are assembling our ideas for the future, but we undoubtedly observe both in G&A and sales and marketing. We observe what you observe, which is that there is a continuous chance to increase efficiency without really compromising innovation or expansion when you look at our benchmark.

Mike Ruberg That does make logic, yes. Turning now to the AI portion of the plot. You have clearly been using AI for some time now. So perhaps describe your past usage of it? How therefore does GenAI alter the platform’s capabilities?

Hemant Gupta Naturally. AI, as we have mentioned, has always been a part of our platform. So as I mentioned, computer vision was ingrained in our platform from the beginning. Assignment mining. To provide the relevant recommendations and inferences that are there, you truly need to understand and analyze data at scale and employ AI. The development of generative AI has essentially provided us with an open source library of LLMs to construct more effectively tailored models.

Where then is the benefit of that? We’re not developing our own generic LLMs. On top of the existing LLMs, we are truly specialising. Look at Autopilot as an example of what that enables us to do. We have nearly Copilot-like Autopilot, which creates expressions for our developers to code faster, lowering total cost of ownership and lowering entry barriers for automations, especially for more difficult and complex automations. Seventy percent of the expressions that our Autopilot generates are accepted by our test group.

We can create faster models with IDP to handle more documents. During the fourth quarter, I discussed a health care client. One model was all they had at first. Now, four or five of those models can be trained more quickly to spread and significantly influence more of their papers.

Mike Roberge Logic dictates that. You also mentioned before the good traction you’re experiencing with Autopilot and IDP. I suppose just in terms of how much traction you could expect going forward, like how many opportunities may those goods present?

Hemant Gupta It seems noteworthy to me. If you simply stand back and estimate the volume of paper moving through the space’s enterprise processes. Since I come from a finance background, I guess, I discover TAM numbers occasionally. To me, that seems like a common sense TAM. Getting after it presents a huge opportunity. And it differs from OCR providers, isn’t that right? Since a few years ago I used optical character recognition. This essentially combines, rather than merely observing, the power of automated document processing with visualization.

I believe that there is therefore a great deal of possibility there. Excited about Autopilot as well. I made reference to the 70% acceptance rate. But as we visit with our clients and at developer conferences, they quickly see the value of having that at their disposal. Faster time to value and reduced total cost of ownership essentially equate to increasing ROI for our clients.

Robert Roberge Actually. Logic dictates that. Then you mentioned on the most recent call that the GenAI craze may be confusing consumers and perhaps eroding some mind share. Just curious as to what those remarks were about and how clients see the combination of RPA and AI in relation to those other elements.

Gupta, As him Actually. I doubt that it is unique to us. That seems to be software-specific. How much about AI do you hear about at every single firm, if you’re a CIO and everyone in this room is an analyst or investor in some capacity? How then do you distinguish between the genuine and the unreal? Every firm now claims to be able to do something that they were unable to do before when you sit down and talk to a CIO about their areas and road map.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)

What I believe Hipbath’s strength is that it says, “We are improving upon what we already did.” Thus, when we discussed the potential for misunderstanding, we really discussed it in the context of growing deal cycles. After they have their belief, customers now have to answer four or five more questions. They are also less inclined to sign the longer-term contracts that are available as the situation shifts and they become a little more unsure. And as I mentioned, that’s not exclusive to Hipbath; it applies to all vendors, and a lot of other businesses released quarterly results in a similar vein.

Mike Roberge Actually. Logic dictates that. Turning now to the partner channel. You had a plethora of large logos up there, obviously. Still, SAP is one that jumps out. Perhaps you could therefore go a little into that collaboration, explaining how it differs from others and what prospects you see coming up with it?

The Gupta brothers Most definitely. The chance to sell software together with other applications makes SAP very exciting. We therefore love our GSIs, if you will. They went and began selling software together with process transformation, installation, and consulting. Software is what we sell with SAP. And so a cleaner core is what SAP believes the partnership offers. Less customizing and a clean core are their main goals.

If automation is at the forefront, as we are, then customizing the ERP or application itself requires less surgery. That’s really exciting because they have over 40,000 clients and we have over 10,000, and we have the chance to reach those additional people together and keep growing within our present clientele. We are advancing really nicely. We sign a new client once a quarter. We signed an eyeglass maker this quarter. We signed Arnott, an Australian biscuit maker who, incidentally, makes excellent biscuits, two quarters ago. However, they also invest much on our platform. We are thus quite happy and will keep moving forward there.

The Roberge brothers Seems reasonable. It’s getting close to time, so perhaps the last question of the fireside chat. Nonetheless, your balance sheet shows around $2 billion, and this year you want to generate about $300 million in free cash flow. How ought we to approach capital distribution going forward?

The Gupta brothers Actually. I would reiterate what you mentioned to start. We, I believe, have an extremely solid position and balance sheet. No debt, which is equivalent to a very good cash position and the absence of the necessity to burn cash in our region. Having stated that, we can take advantage of our circumstances. Our $0.5 billion buyback authorization is fully committed to be executed. You may notice a small lag in that area in the first quarter due to certain significant non-public facts, but we remain fully committed to that buyback.

After that, we can keep spending capital in wise ways like our comprehensive partnership—which is essentially a longer-term bet—or return it to investors. So we can both use it for medium-term or short-term wagers or return it to our investors. And we assess that every quarter—not every week, but every quarter. Working that way opportunistically is something we believe gives us a big advantage.

William Blair 44th Annual Growth Stock Conference - UiPath Inc. (PATH) (Transcript)

The Ruberg brothers
Thanks, As him. I like that you are here today. Many thanks to everyone who joined the room. For those interested in the breakout, it will take place here on the second floor in May. And in ten minutes, I will restart it.

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