Q2 2023 UiPath Inc Earnings Call
Greetings and welcome to the you Ipass second quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
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Please note this conference is being recorded.
I will now turn the conference over to your host Kelsey Turcotte Senior Vice President of Investor Relations you may begin.
Good afternoon, and thank you for joining us today to review U Ipass second quarter of fiscal 2023 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 Dienes, you Ipass co founder and co Chief Executive Officer, Rob Enslin Co Chief Executive.
Sure and Ashish Gupta, Chief Financial Officer, Rob will start the discussion and then turn the call over to Daniel after that she will review our results and provide guidance. Then we will open the call for questions. Our earnings press release financial supplemental materials are posted on the you Ipass Investor Relations website.
I R. Dot you AIPAC dotcom. These materials include GAAP to non-GAAP reconciliations we plan to discuss non-GAAP metrics on today's call.
Afternoon. This call includes forward looking statements about our ability to drive growth and operational efficiency and our financial guidance for the third fiscal quarter and fiscal year end 2023.
Actual results may differ materially from those expressed in the foreign looking statements due to many factors and therefore investors should not place undue reliance on these statements.
For a discussion of the material risks and uncertainties that could affect our actual results. Please refer to our annual report on Form 10-K for the year ended January 31, 2022, and our other reports filed with the SEC, including our quarterly report on Form 10-Q for the quarter.
Early period ended July 31st 2022 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'd like to highlight that this webcast is being accompanied by slides, we will post the slides and a copy of our prepared comments to our Investor Relations website immediately following the conclusion of this call.
Before I turn the call over to Rob I'd like to inform you we plan to hold an investor day during our forward five user conference on Tuesday September 27th at the Venetian Hotel in Las Vegas, starting at 11 45, a M Pacific time with lunch that will feature roundtable hosted by our executive team. Please at.
Reach out to IR at <unk> Dot com for registration details now I'd like to hand, the call over to Rob.
Kelsey and good afternoon, everyone and thank you for joining us on our second quarter results exceeded the high end of that guidance, despite an increasing FX headwind and a choppy macro environment.
They are crossed the $1 billion Mark.
104 3 billion.
An increase of 44% year over year, driven by net new I R of $66 million.
We now serve more than 10500 customers automation continues to be a central part of digital transformation for companies of all sizes and across all industries.
We see this in the breadth of companies continue to invest in your iPad like ADT.
This Mayo clinic smart sheet and take two interactive which are just a few of the organizations that invested in you ipass platform in the second quarter.
Our relationship with items, a leading global provider of talent acquisition software is a good example of the power of automation.
During the quarter they expanded the your ipads deployment and looking to the future. They plan to embed you Ipass automation cloud robots and integration service into the ice talent cloud to enable their customers to automate routine tasks and business processes.
Success stories like these and dozens of customers and partners I have made since I joined your iPad leave no doubt in my mind that we will be the enterprise automation provider that all organizations will embrace overtime.
That's because we moved automation beyond RP a tour.
Full suite of end to end platform capabilities.
Uh-huh Finance AG when safety is better than we do.
Post finance, a retail financial institution in Switzerland.
Has been honest automation journey for three years with a competitor in our P E and another in process mining.
By a search for more efficient automation platform with a wider scope. They determined that your iPad platform is the one in the market that can fulfill all their current and future needs while significantly reducing the total cost of ownership for the automation program and.
And helping them to achieve their strategic goal to become more efficient.
Our platform not only allows customers to discover automation opportunities.
But also redesign and improve previously disjointed processes.
Freeing them from the endless cycle of outdated approaches and unlocking the true digital transformation.
Digital transformation is one of the most important secular trends and you Ipass platform is central for companies to reach their goal.
Oh man over executives told me that automation has accelerated their business.
Prove their customer and employee experience.
Increased speed to value and allowed them to redeploy capital.
These kinds of outcomes.
Customer discussion from the RPI centre of excellence, which is automating process by process to the C suite executives, we have a holistic view of enterprise requirements.
A great example of this evolution is a U S based global power technology leader, our customers since 2018, they've automated over 160 processes across finance supply chain HR.
And shared services saving over $4 million.
Now with the C suite sponsorship they have expanded their program to the full you ipass platform both on premise and in the cloud and are launching a citizen development and attended automation program.
My takeaway.
From the last few months is that the market is clearly evolving and you ipass is driving that evolution.
We have a first mover and a technological advantage and as automation leader, we continue to expand the value we can deliver for our customers.
That being said, while we believe our business has considerable room to grow.
Top line metrics I have slowed and we need to evolve how we manage our business.
Our go forward priority will be to balance investing for long term growth, while managing the business to consistently expand non-GAAP operating margin.
Deliver sustainable positive adjusted free cash flow in fiscal year 2024 and beyond.
As you said during your IPO.
The long term.
Objective, we expect to achieve a non-GAAP operating margin of greater than 20% and a commitment to that objective has not changed.
Let me be clear.
I don't believe we need to sacrifice growth to achieve our profitability targets the.
This market is large.
And early stage.
Customers are committed to your path and they loved the outcomes we deliver.
In the short term, we are strategically repositioning the company to increase velocity efficiency and customer centricity.
Includes evaluating elevating customer conversations selling business outcomes and helping organizations realize the transformational benefits of automation.
We have the opportunity to be the essential automation gold standard for customers delivering technology that is integral to their business strategy.
To get there we are aligning around four strategic objectives.
First <unk>.
Investing in our platform to increase our competitive moat and delight, our customers with disruptive and innovative capabilities that improve outcomes accelerate return on investment and leverage the cloud.
Second.
Increasing velocity and productivity.
This is where we are expanding the most energy and also expect the greatest return.
We need to set ourselves up to take advantage of a credible new platform releases like 22 10.
What's your plan to unveil at 45 in a few weeks.
This includes branding and marketing around business outcomes that resonate with the C suite.
Simplifying our sales motion to lower cost building strategic partnerships that elevate our brand and service distribution channels and coalescing around partners that can really move the needle.
Third we are bringing together diverse team aligned around driving your iPad to the next level.
Every business that grows at the at our rates requires experienced leadership.
We have great bench strength.
Having already elevated internal leaders to new roles.
And a strong brand that is attracting a great pool of new talent.
As you saw by today's sales leadership announcements.
Finally.
And equally critical we are committed to sustained profitable growth by leveraging our scale and exercising disciplined resource allocation.
Profitability is a core pillar of our go forward strategy.
While we are reducing our near term forecast to account for a significant FX headwind.
Macro environment and our internal repositioning.
I am confident in our strategy and I firmly believe from my experience.
But we are on the right track to achieve our growth and profitability objectives.
And I am confident in our strategy.
I'll now turn the call over to Daniel.
Thanks, Rob.
We frequently talk about with our market leadership and in July we were positioned by Gartner as a leader in the 'twenty to 'twenty two Gartner magic quadrant for robotic process automation Research report for the fourth year in a row positioning you wipe off.
Highest for ability to execute and for first for completeness of vision. We are gratified to have received this recognition.
We continue to hear from our customers the breadth of capabilities in the U I Pos automation platform is why we win.
You Ipass is the only company that offers a complete solution, including tasking process mining documents understanding that suite, our P E and low code deployed on premise or in the cloud.
That's one process mining.
Key to helping customers to discover new opportunities for automation and in June .
We were named a process mining leader in the technology vendor landscape.
Further into the Everest group's peak matrix for process mining technology vendors 2022 for the third consecutive year.
In our upcoming 20 toward the 10 platform release, we'll introduce new process mining capabilities.
But the other end of the automation lifecycle. They sweep is emerging as a meaningful growth opportunity for you a path.
And then important tool for customers to scale their programs resiliency.
Cool.
Sweet expands when customers use you I pass those capabilities for both RP and application testing driving our platform adoption in a new market.
Finally, we have long believed that.
The combination of U Y plus API plus AI automation.
Is the key to customer success and are really excited the ball with the acquisition of reinforced by adding reinforced to our platform.
We can now leverage natural language processing and machine learning technology to do what we call communications mining transforming massive amounts of unstructured data into actionable information, we speed and accuracy.
Which customers like UBS.
Checks and Farfetch are already doing.
Combining the room for with the breadth of our AI powered capabilities unlocks new opportunities for our customers.
We are very excited to unveil our newest innovations are four five where we will announce exciting functionality in our 2022 than platform release.
All elements of our platform, we hope to see many of you there.
With that I'll turn the call over to a ship to talk in more detail about with our second quarter results.
Provide guidance.
Thank you Daniel before I get started please note that unless otherwise indicated I will be discussing results on a non-GAAP basis and all growth rates are year over year we.
We delivered a solid second quarter in the face of increasing FX headwinds and a more measured buying environment.
Customers understand the meaningful business outcomes to automation delivers and the competitive differentiation of UI paths automation platform in.
In fact, two of our largest deals in the quarter were new customers, making multi year commitments to our platform, which is really nice to see.
Turning to our numbers second quarter are our totaled 1.0 for $3 billion up 44% driven by net new <unk> of $66 million on.
On a year over year basis, FX created an approximately $8 million headwind to net new <unk> in the quarter and a $12 million headwind to the total air our balance.
Base net retention was 132% normalizing for FX and excluding the impact of Russian sanctions.
Base net retention was 135%.
Consistent with the broader macroeconomic environment dollar based net retention rate was meaningfully stronger in the Americas.
Dollar based gross retention was 98%.
This best in class metric is consistent with previous quarters as customers are committed to our platform, which is driving quantifiable ROI.
As of the end of the second quarter customers accounting for at least $100000 in error grew more than 30% year over year to 1660.
While customers control contributing over $1 million in air grew over 60% year over year to 190 <unk>.
Revenue grew 24% to $242 $2 million normalizing for the year over year, FX impact, which was an approximately $20 million headwind revenue grew 35% year over year.
Remaining performance obligations increased 36% to $709 million.
Normalizing for the year over year, FX impact, which was an approximately 51 million dollar headwind, our apio grew 46% year over year.
Current RPI increased 37% to $442 $6 million.
Total gross margin was 84%, reflecting ongoing investments in support and cloud infrastructure as we scale that business.
Software gross margin was 91%.
Looking ahead, we continue to expect gross margin to be greater than 80%.
Second quarter operating expenses of $215 $7 million increased 34%, reflecting only one month of benefit from the steps we took in the second quarter.
GAAP operating loss of $122 million included $88 $3 million of stock based compensation expense.
non-GAAP operating loss was $11 $2 million.
Second quarter non-GAAP adjusted free cash flow was negative $23 $3 million.
And we have $1 $7 billion in cash cash equivalents and marketable securities and no debt.
Let me now turn to guidance.
First we guide to what we see in the pipeline, which continues to fluctuate given the choppy macro economic environment, which we anticipate will continue.
Second more than half of our business is outside the U S and we price in local currency, including Euro and yen.
And as a result, there was a material FX headwind for both <unk> and revenue that has significantly increased as we move through the year.
Lastly, going forward as Rob said profitability is a core pillar of our go forward strategy.
While the reduction in our top line near term forecast reflects the FX headwind of the of the macroeconomic macroeconomic environment and our internal repositioning we are committed to our goal of achieving non-GAAP profitability and positive adjusted free cash flow in fiscal year 2024.
Turning to the numbers first for fiscal third quarter 2023, we expect air or in the range of $1.091 billion to $1.093 billion included including an incremental FX headwind of approximately $5 million.
Excluding the foreign exchange impact <unk> is expected to grow 36% year over year at the midpoint of guidance.
We expect revenue in the range of $243 million to $245 million, including an incremental FX headwind of approximately $10 million.
Excluding the foreign exchange impact revenue is expected to grow 22% year over year at the midpoint of guidance.
We expect non-GAAP operating loss to be in the range of negative $30 million to negative $25 million, reflecting the timing of investments that shifted from the second quarter to the third quarter and an incremental FX headwind of approximately $5 million.
And we expect third quarter basic share count to be approximately 550 million shares outstanding.
For the full year, we expect air or in the range of $1.153 billion to $1.158 billion, including an incremental FX headwind of approximately $15 million.
Excluding the foreign exchange impact air or is expected to grow 30% year over year at the midpoint of guidance.
Revenue in the range of $1.002 billion to $1.007 billion, including an incremental FX headwind of approximately $25 million.
Excluding the foreign exchange impact revenue is expected to grow 22% year over year at the midpoint of guidance now.
non-GAAP operating loss of approximately negative $15 million, including an incremental FX headwind of approximately $15 million.
Excluding the foreign exchange impact non-GAAP operating income is expected to be $25 million for the full fiscal year.
Now I'll turn the call back to Rob.
Thanks, a shame.
Crossing $1 billion and they are this year is a big achievement.
But it is just the first milestone for us.
I am confident that this is a multibillion dollar company that customers see as integral.
So how they run their business.
We have a strong foundation to scale and we are making decisions that put us on track to achieve growth and profitability.
Our potential is enormous.
And we believe in the long term vision of the company now more than ever.
I look forward to meeting many of you over the coming weeks and to laying out our strategy in more detail during our Investor day on September 27th.
We will now take questions and I'll turn the call over to the operator, operator, please poll for questions.
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One moment, please while we poll for questions.
Our first question is from Raimo <unk> with Barclays. Please proceed with your question.
Perfect. Thank you.
Thanks for the extra clarity Rob.
Okay.
You think about the strategic changes that you talked about can you just kind of double click on that a little bit more in terms of like.
The initiatives, you're doing there and usually when you do that you cannot have a period, where you have a negative impact and then it should get better off the west Coast, which is why you are doing can you just talk a little bit about.
How you see that evolving at the moment.
The second follow up question for Ashish, If you think about the at the beginning of the year you were one of the first two kind of called out some macro uncertainties.
Back in March you talked about the renewal pool and you didn't know how customers would behave if you think about the additional comments you've made to date is that still the same issue was there something else. That's happening can you just elaborate there a little bit more thank you.
So let me go first Ryan Thanks for the question.
Yeah, as we as we evolve and reposition the company you know we spoke earlier on about how we are driving digital sales and which is basically a combination of an inside sales you know emerging segment and we are very happy with the progress that we continue to make in that space, we need to position the company to drive business outcomes into the sea level suite.
Position the enterprise automation platform to be the winner and we actually believe that the product is absolutely incredible.
And in order to do that we are aligning the sales organization around that bringing in new experienced talent, we promoted some talent internally as well leave just a nonstarter the European leader and we've seen some promising signs in North America as we move the automation platform. So we are pretty confident that over time. This is the right.
<unk> and as we said we had laid out at Investor day, and very very clear terms.
And then Raimo just when you think about you know our guidance and tracing back to the first year first.
Mind, everybody like we have a very strong foundation globally. So we actually have a very good view of just of just you know.
Overall exposures, that's there here's what's different FX continues to get worse and deteriorate right. We came to parity on the euro the yen continued to deteriorate as well as the quarter has progressed.
We do see weakness in Europe , and Japan in particular, and we see that reflected in our dollar based net retention rate, we still see that as an asset when you take out the impact of FX.
When you look when you break that down one level further.
Because dollar based net retention rate when is whereas not as exposed to the macroeconomic environment. We see a lot of strength. There. We continue to see strength. There. We also see strong grocery gross gross net retention rates, which we talked about at 98%. So we still feel very confident in the value around our renewable base that our software is performing.
So we just we look at our pipeline, we look at the activity, we listened to our customers are saying.
And we just find it appropriate given the environment to.
To provide the guidance that we did here.
Okay. Thank you.
Our next question is from Phil Winslow with Credit Suisse. Please proceed with your question.
Alright, Thanks for taking my questions just wanted to focus on is the guidance in terms of what you're hearing from customers. Maybe maybe Rob you can you can start with this and in terms of just.
The lower net new <unk> X maybe stations obviously, excluding FX are you seeing any sort of what are you seeing in terms of the change from customers are they just simply shrinking maybe sort of the scope.
Of all the deployments or just deployments of whole getting pushed out I guess sort of more color. There would be helpful. And also maybe compare that to what you have done in the first half and I just have one follow up for Daniel.
Yeah. Thanks, Phil.
I would say to add on to Ashish comment.
We're definitely seeing a.
Budget.
Discussions taking along the C level executives getting engaged in as we view automation, obviously as it is a key growth lever for companies.
But we definitely seen those outcomes and as we position you experienced leaders weaken available to deal with that more as I said earlier, we do see the benefit.
Of that discussion in North America, we are starting to see.
Really positive signs in the upper end of the segment as well.
Got it and then Daniel on the on the technology side, obviously, you've been investing organically and Inorganically and expanding your portfolio, they're really trying to build out and then suite.
You know when you talk to customers.
What are you starting to resonate is that starting to resonate with them. In particular are there parts of that suite that are starting to carry more weight.
Yeah, Hi, Phil.
Look I would say that the entire plot form, whereas when it's very well we've.
Customers.
They find the value from a process of discovery.
Which is very important and are finding opportunities for automation tool implementing where we play for perceval automation of enterprise automation through delivering great all Wisconsin measurable outcomes, we are seeing a meaningful.
Traction with our social suites.
It's not only for testing RPE, but also Florida This thing.
Application implementation and.
We are seeing it as a.
Becoming like a clear path in digital transformation, which people are implementing new systems and it's a lot of menu of labor involved in testing the new systems I mean, it makes a lot of sense to automate the manual testing and then the reuse the building blocks into.
Delivering and then twins automation.
Our next question is from Keith Weiss with Morgan Stanley . Please proceed with your question.
So this is such a thing for Keith This is Sandra for Keith. Thank you for taking the question Rob I wanted to get a sense of some of the spending has a disease. So outside of the FX impact, but in terms of customers trying.
Trying to expand their business with you are attracting new customers at a high level you would think that automation will be a super high priority given the inflationary environment, given the need to get more efficient and so in terms of the sources of those that spending has it is it didn't see is it about the implementation cycles is it about the payback period.
I assume this is a extremely sells itself on an ROI basis, but if customers are prioritizing projects with you know 12 months or less payback just to sort of automation fit that fit that fit the bill if you'd like or alternatively are there potentially competitive issues that are sort of lately, but it feels like.
Like what was the.
Eval process any any sort of color on.
The nature of the hesitancy to get deals done really appreciate it. There's no question customers see the benefit of automation I would say the automation that market is evolving and it's new.
And when you look at the brought up broader platform that takes into account, what I would say speed to value.
Spoken to some senior executives here in New York City and in the bank and they are looking to utilize you ipass platform to drive really financial transformation in the organization. So we see it in many of our conversations that's absolutely that's absolutely.
True, but as we as we look at that those decisions are taking a little bit longer.
They take a little bit more foresight and end customers are taking just a little bit longer to drive it as we book as we bolt on ROI calculators and and drive business outcomes with these customers I'm absolutely convinced.
This is.
That automation is definitely going to help companies do not any digital transformation, but drive speed to value.
In the in the lower end Enterprise segment, one can look at the.
The emerging markets, we are still very relevant and product is relevant and we're doing very very well in that segment and that's where we acquire customers and we continue to acquire customers.
So I would say over time I feel really confident that we will be able to deliver and at the top end of the market, we need to focus on a denser.
Ability to drive consumption with our largest accounts and that's something that we're focused on as well.
Understood I really appreciate the thoughts and then as a follow up.
I just wanted to get some.
Maybe some context around the guidance. So as you look to the Q3 and the Q4 implied guide are you extrapolating just the trend that you've seen through.
Through July two through August up to the balance of the year It seems like Americas.
Been a source of strength do you assume that the strength continues in the Americas are you being more conservative on that side of the business too.
Are you assuming something that's worse than what you've seen or just extrapolate what you've seen thus far.
I mean like we always say, we're very consistent with the way we guide we guide to what we see in front of US today, and we see Americas strength, we have a lot of confidence in our business in that business as we look at our pipeline and we look at as we look at our execution, there I think Europe , and Europe and Asia continue to be outsized.
Impacted in terms of from a macro and a foreign exchange standpoint, and those both of those that we have guided in and the other piece is.
As Rob said, we're repositioning the company and we're really excited about the leadership announcements that are out there and so we're also just accounting for the <unk>.
The transition that's natural as any company repositions itself in certain areas. So those are the two factors that really give context around our guidance.
Our next question is from Mark Murphy with J P. Morgan. Please proceed with your question.
Yeah. Thank you very much Ashish is it possible to disaggregate the reduction and they are all I think it's about 6% for the year into those three factors I think you had mentioned FX macro and your own internal repositioning in other words are those equivalent or are there are there very.
Magnitudes across those three.
Yeah, I mean, when you look at I think FX is the one that has the most quantifiable in terms of where that is and so we when you look at it versus the prior consensus in terms of the change in guidance, we look at that as $15 million to $20 million in terms of the impact just from FX.
You know the macro and end and kind of some of the internal changes that we're doing.
Other items for that that's really hard.
To disaggregate I would say we look at both of those as you can play as we give our guidance.
That's there so the macro the FX is quantifiable when I provided that mark the other two I would just say is more guiding based on our pipeline that we see in front of us today.
Understood. Thank you and then I had a quick follow up perhaps for Daniel or Rob I'm wondering if you're seeing equivalent growth rates for automation bad run entirely inside a Microsoft environment versus those that are.
Our stretching across multiple environments and if if there's any way you could just remind us what does that mix stand out of the kind of Microsoft only environment today.
Yeah.
Well.
Traditionally and it continues today, our technology was mostly use for <unk>.
Complex processes that usually spend multiple systems. This is actually the strength of our technology and most of our customers.
Have a multiple enterprise systems. This is it's a big difference between the enterprise automation platform.
Very well across multiple system and in application automation, but Microsoft doing similar system application providers.
Have basically enter the market recently, so I am very confident that we have the only complete blood for that offers an end to end process automation that is differentiated for all customers.
Our next question is from Kirk <unk> with Evercore ISI. Please proceed with your question.
Yes. Thanks.
Rob I was wondering can you just talk about the environment, maybe from a vertical or an industry perspective are you seeing any difference in the discussions youre, having in certain industries, rather than the others at this point in time and and I guess just to some of the earlier questions on the on the sales organization anything you all are thinking about doing sort of towards the end of this year or.
Well any sort of changes with some of the new folks coming in be more positioned at the beginning of fiscal 'twenty four.
Yeah. Thanks, good question.
So we are evolving.
Our sales organization in flight I would say when you look at the industry, we continue to see significant demand for financial services.
For health care and for manufacturing I wouldn't say.
The environment impacting any of them more than than others.
For sure I would say, it's much more more geographical some things that we're doing in terms of.
We're driving significant uptick with partners for sure. We're looking at distribution models were looking at the emerging to graduate accounts into the enterprise segment and as I said in the.
A density level the majority of those changes will take place.
In the beginning of the year.
We have brought in new talent and we align all outcome to that but we feel good about what we see in the market already around business outcomes, and how enterprise automation drive speed to value for companies.
Thank you. Our next question is from Bryan Bergin with Cowen. Please proceed with your question.
Hi, Thank you I wanted to ask on the revenue headwind associated with just the cloud transition I think it was four points previously so first any change to that assumption and then just thinking out further should we expect a more deliberate push on cloud deployment by clients to cause that headwind to potentially get worse as we go forward beyond.
This fiscal year and I guess can you give us any sense of deployment mix and the revenue base now and how you're thinking about puts and takes of that progressing would be helpful. Yes.
So the four point stays relatively consistent for the second half we don't we don't see any change in our assumption there.
The launch of our automation cloud robots was very successful, but it's on track with the way we've discussed it and modeled it.
Post our launch of 'twenty two that for them. When we think about going forward you know Brian like longer term assumptions. So you know those are things, we will discuss it in investor day, but we don't see anything significant at this moment versus the previous assumptions that we've given them and in terms of automation cloud robots, which is the biggest impact from a revenue.
Standpoint, we've already gotten a dozen customers there its been great feedback.
We mentioned items in our script and Theres a great partnership emerging there that is using there and we see other companies as well like smart she and other companies very interested to see how they can take take advantage of those automation cloud robot capabilities to sum it up no change in the assumption we.
We will talk more about that in Investor day, but there's no no significant difference at this moment in terms of in terms of that as a headwind.
Okay, and just understanding FX, you've given for air on the back half here any any further color you can give on M. D. B R. As you go through <unk> and <unk> yeah.
I mean net dollar based retention rate, we had a 300 basis point FX headwind that is there like.
And like I mentioned, when you disaggregate, it really Europe , and Japan had the largest impact on you know on the deceleration of the net dollar based retention rate, we do have confidence in as we reposition the company to Reaccelerate that FX and macro stabilizes.
Right now those are the two big largest pressures that we feel is just really from those two geographies.
Our next question is from Brad Sills with Bofa Securities. Please proceed with your question.
Oh, great. Thanks, so much.
Wanted to ask about land versus expand I think a couple of years ago. The company pivoted more towards expansion deals understanding that the installed base was such that there was that opportunity you can see dollar base net retention has been holding nicely in the 130 plus range here.
Is there any plans to go back towards land potentially here or do you still see that opportunity within the installed base to kind of continue to drive this kind of growth.
With more focus on expansion deals yeah, Brian Great question. So.
We definitely see the opportunity to drive expansion deals as the automation.
Enterprise automation platform becomes very relevant for companies that is how we would want it when they do it we would also want to see how we can drive it in a really tough segment and key accounts. It provided density model there and we're also looking at customers in terms of the propensity that they have to expand so we actually looking at this.
Full segmentation and how do we drive inefficiency model in terms of acquiring a company promoting our company and ensuring that they have density with.
With consumption.
Understood. Thanks, Rob and then one more if I may. Please just you mentioned bolstering the competitive moat what are some of the things that you think of in the roadmap here that you know.
Our behind that potential to continue to build upon the platform and the capabilities.
That do differentiate your wife asked thank you.
I'll start and I'll hand over to Daniel.
Having spent the last three months visiting customers and partners doing well too as I've been to Asia Europe , a couple of times.
Probably 60, plus companies, but I will tell you that we have.
A very unique platform that nobody else has in the market in an end to end way from discovery to process understanding our ability to fulfill it through our P E and AI and ml and the ability to connected test and then have insights into how they can operate in a company that message when we connect that brand.
To the C suite, I think is going to be incredible.
And then Daniel can talk a little bit about the details on the technology.
Yeah, so wherever you're only plus for them.
Succeeded in combining API based automation, we view based on observations. We believe it's in the single low code No code platform that is easy to learn.
This is tremendously important to.
Automate a vast array of.
Existing processes and new processes.
We completed the plasterboard by adding document understanding that is based on our AI for AI and machine learning and we are making steady progress that we are building a world class platform. We have acquired process mining three years ago, we've done cloud re platforming of the technology and.
We are the clear number two in the.
And in that part of the technology and we are closing the gap.
With the number one and are in the process of mining plus our discovery suite that combines process mining first mining that's captured.
Automation hub is unparalleled and helping our customers discover both processes that system looks live and the tasks on harvesting that they thought on the desktop level.
We're making steady progress.
It's mostly integrated all the components of the plus one in a single unified experience for the end user.
Our next question is from Terry Tillman with true Securities. Please proceed with your question.
Yeah. Thanks for taking my question and follow up I guess Rob's first question for you there's been a number of questions about just the strategic repositioning of the company go to market kind of excellence of your focused on if you had to look you just given your time so far at the company and just thinking ahead over the next 12 to 24 months, where do you see the biggest impact though to this key metric they are or is it.
New customers on the enterprise side coming into the fold.
And digital sales actually add up to a lot more for the expansion with your existing enterprise customers can you kind of.
Pick apart those three areas or maybe I'm missing something I'm just trying to understand what do you have the biggest needle mover and then I had a question for Ashish.
Yeah, we need to do both.
In other words.
Yeah.
Selling products into the enterprise and emerging enterprise segment is a great way to acquire new.
The new customers.
And then we need to determine how to reposition.
These companies so that we actually drive enterprise level scale activity. When we look at enterprise level scale activity. That's why we're talking about.
Driving enterprise automation.
As seen through companies. So we have to do both we have to we have to continue to acquire companies, we have to understand which part of these companies have the propensity to expand and when we know and understand where the propensity is we need to make certain that we provide dense coverage to them. So that we can accelerate the expansion as well. So we're looking at that level all of them.
Fishing team and we also leaning on our partners and us.
Space to help us drive try this so to me it's not it's not just one play. It's it's it's it's multiple place I think we've done really well at the acquisition I think our digital sales organization is really very very good and very scaled and you can see that across the board and we have a unique opportunity to evolve enterprise.
Enterprise isn't automation to become truly a business play that drive speed to value. We are also looking at creating solution packages. So that it makes it easier for companies to understand what we're selling and how to position and then applies as well to our sales folks.
All these pieces coming together well, we will lay out that investor day, very very clearly for everybody to understand how this will evolve over time.
Got it thanks, Robin just a follow up regime I think you all talked about a path to non-GAAP EBIT or operating income profitability and free cash flow positive is that for the full year of FY 'twenty four or would that be at some point within the year. When you hit that those metrics. Thank you.
Look we're committed to profitability I just want to emphasize that to begin with we're going to talk more about this at Investor day, What we said in the script is pretty pretty clear in terms of we want to get sustainable and profitable.
You know in in in the in the in the short term and fulfilled in fiscal 2020 for US is definitely insights for us, but we're going to talk more and provide more specific information at Investor day.
Our next question is from Michael <unk> with Keybanc. Please proceed with your question.
Hey, guys couple of questions just kind of coming back Ashish I think maybe best friends to Raymond question about <unk>.
Going back to Q4, when you had seen some negativity. So just walk us through this trajectory. If you would were in Q4, you said you were seeing macro pretty much across the board and impacting the pipeline.
Just in Europe .
And then last quarter I think you said that customers were starting to them to get a handle on things and now things seem worse again from a sales cycle perspective, and particularly bad at background. So excuse me in an industry Geos. So if you could just walk us through why that.
AD then better and that again that would be helpful.
So one is like I want to make sure like we guide to what's in front of US right that is a very consistent way in which we guide from.
From the very beginning.
It's a really dynamic environment I, just I want to make sure I think we all can attest to that and we feel it. So really you know coming out of coming out of last quarter.
We felt more optimism in EMEA in particular, when we were guiding you know in terms of that.
Right now we see it into much more challenging than expected on the ground. There Rob can also give more color on that as he is he'd discussion has his discussions with with customers, So really Japan, EMEA or Europe , as well as kind of some parts of Asia like they are all they all feel just more challenge when we look at.
The dynamics right here today, and we guide what's in front of US at the same time, we feel like.
The opportunity for automation, it's big we see our customers engage our dollar based net retention rate to me shows the durability of our model and the value proposition that we have.
And as we as we talk about guidance.
Want to make sure that we are responsible and prudent and derisk. The second half of the year just given the given the dynamic environment in which we're in I'll, let Rob give more color on Europe et cetera, No I just think that's consistent I mean, having spent time in Europe in the last couple of months. So I would say we had slight optimism that.
Companies that used to what is happening in the world I think we said that the world has become more regional regional but I, but I think the Sydney to the level of what's happening now with inflation and the energy and so on is having an impact and companies are thinking about.
What to invest and where to invest and they take them and they are taking significant amount of time to make those decisions.
The more we focus on.
Automation and helping companies and delivering that message to companies I'm pretty convinced that we will we will be more successful in Europe for sure.
And then my phone I think someone else asked about competition, but.
Not sure if you answered it or maybe I missed it but.
What is there any change in the competitive environment, whether it's typical people would think of like like Microsoft.
Not just other companies doing RPI, but.
Think of it as maybe potential for competition substitute products with or something.
Something like a low code or could you do us offerings also so.
Are you seeing more competition strictly an RPI and then maybe alter.
Alternative ways of solving the problem.
We have not seen any material change in the competitive landscape seems in the past three.
Three months.
And.
We continue to see Microsoft, but limited to personal automation.
And enterprise automation, we are competing with more of our traditional.
Peters.
But we have not we are not seeing the new entrants like service no sales force.
To into our opportunities.
They are probably we are seeing them in less than 1% of our opportunities.
At this moment I'm pretty confident we have a very differentiated.
Left for them.
That.
It's it's it's a clear leader in automation is assisted by various and leased by our customers, but anyone basically.
Our next question is from Michael <unk> with Wells Fargo Securities. Please proceed with your question.
Hey, there. Thanks. Good afternoon I. Appreciate you taking the question I know there've been several on the go to market changes, but I do want to go back to that topic.
We saw Kristen Rob joined earlier in the air and we have a few new regional announcements on the team. There this quarter commentary in terms of the backdrop still sounds clear that automation is a big opportunity, but given changes in go to market changes in macro how do you make sure you aren't taking your eye off the ball in the core automation space and are those changes things.
We were able to kind of shore up ahead of the user conference the customer conference and just the upcoming important southern fiscal Q4 period that you have in front of me.
Yeah, and we feel confident that we have.
This showed up but I would also would also add in terms of the the opa.
Or the automation the call automation that continues to expand and then you'll see that you'll see that in the digital sales piece, but as you reposition the broader enterprise automation is a platform play that we have to drive true business outcomes and foster ROI environment.
Many of the leaders that we brought in I understand that and we will bring in more experienced leaders as well to actually drive to drive that.
To drive that environment.
And to be honest when you look at.
This and many of you will be at Investor day, the attendance for 45 is amazing.
So I'm absolutely convinced one is we have the right strategy, we laid out a very very clearly for you.
You'll see that we all focused on ensuring that we will get.
Enterprise automation at the right level and at a 45 with amount of folks that are showing up it clearly shows that we all the automation leader and we have a unique value proposition across the board for all aspects of automation.
Thank you.
Got it.
Our next question is from Alex Zukin with Wolfe Research. Please proceed with your question.
Hey, guys a lot of mine have been asked but just two more kind of clarifying questions on previously discussed topics maybe the first one just.
It sounds like the guidance has been derisked for incremental macro deterioration in Europe , but have you reflected anything in terms of incremental macro deterioration of the U S.
In the guidance and then as a follow up.
Just the confidence interval here.
Round two.
Some extent just the.
To Michael's point that the execution changes that youre, putting in place and the repositioning don't have an outsized impact on actually closing the business at the end of this year's Q4.
Yeah, So I'll start with I'll start with you know.
The guidance. So one is I think that the.
The Americas from our standpoint, we guide what's in front of US as of this point, we don't forecast further deterioration in Americas, we have our sales leader in place that you know that the announcement came out that was recently promoted has been with the company from a macro standpoint, we still feel we still feel good about the pipeline relative to Europe .
And to Japan.
And the indicators like I said, we have a strong dollar based net retention rate, we are not FX exposed in Americas. So I think we are appropriately guiding.
For where we are today of course.
Can change from the macroeconomic environment.
We guide for with what's in front of Us at this moment.
And then in terms of the overall year like again, we we've accounted for not just the macro but also the repositioning of the company as Remo talked about even in the beginning with.
We've derisked, we've derisked that in as a part of our guidance.
The the the impact that comes with any change and we feel very positive and excited about the change for our long term, but we acknowledge some of the short term rest of that could create yeah. We've derisked.
And we pretty.
We are seeing signet, when we say we see positive.
Positive.
Signs in North America, we look.
We are seeing the opportunity of deals larger deals coming into the pipeline and we actually have we have actually implemented very strict forecasting policy. So we feel really good about the derisking and the opportunity in front of us in North America.
Perfect. Thank you guys.
Okay.
Our next question is from Fred Meyer with Macquarie. Please proceed with your question.
Hi, Thank you.
I think likewise many of my questions have been asked but I wanted to check in about just sales across the platform.
No clearly we understand that your iPad is going to market with end to end automation platform, but are you seeing any particular segments that are kind of running a bit hotter or are seeing more demand or some areas that might be a little bit softer or receiving additional scrutiny say between RPI versus process mining versus past my interest at various different aspects of the platform.
So when we look at across the platform I really wanted to.
See customers wanting to buy the platform and I think the metric that actually reflects the best is our customers greater than 100000, and our customers greater than $1 million, which we showed continued positive momentum in both of those areas we've discussed.
<unk> in the past that we do we do have E. L. A offerings that are there for our customers and what's attractive for that as they get the full breadth of our platform and full automation capabilities from discover to the core or P. A to additional additional capabilities as well. So those two metrics really show that do we believe there is still more opportunity.
Yes, and I think Rob talked about that in the script and that is some of the areas that we're gonna be talking about at Investor day, Rob can add as well from his comments with customers.
I think you're onto something.
There's opportunity there is significant opportunity in this market is not constrained.
We need to go after that opportunity to Swedish clearly.
And amazing product in the market and that it connects to sweet tasting test automation across all platforms and allows you to automate the automate automation inside the automation platform. So I think we have we have a unique and a big opportunity in that space.
On the on the discovery side.
Customers are just getting started.
Thank you and if I can get one more in.
Your higher today of our other announcements today of hiring Mark Gibbs his background at SAP.
Also just it looks like the integration you announced with Workday is there anything to read here that you are seeing more opportunity in other HCM and ERP related workflows and automation there because it's it's clear certainly that some.
The players in the space and focusing on automation.
And maybe we haven't been clear, but I would tell you.
I see Oh, I'd phrase it maybe a different way I see a significant opportunity in embedding automation.
Into technology products, where those products will.
Drive higher value services for their customers I think Iceland is a great example of that and we are talking to a number of technology providers. In this space. So I think that that that is a runway that we can we can drive for our product is really well suited to being embedded solutions.
Solution sets and clearly when you look at the.
Uh huh.
The different European markets with transaction provide a market we focus on sub processes and so we are additive additive in terms of how.
Customers would see value in any customer that's going through digital transformation, a transformation or migration.
Whether it be SAP, or oracle or workday or salesforce.
Including automation into their transformation is an incredible opportunity and that's where we see the <unk> will see automation going forward.
We have reached the end of the question and answer session and I will now turn the call over to Rob Enslin for closing remarks.
Thank you very much everybody for attending today really appreciate it and we look forward to seeing everyone at Investor day.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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