Q4 2022 UiPath Inc Earnings Call
Speaker 1: Greetings and welcome to the UI Path 4th quarter and full year fiscal 2023 financial results conference call.
Speaker 1: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker 1: Please note this conference is being recorded.
Speaker 1: I would now like to turn the conference over to your host, Kelsey Turcotte, Senior Vice President of Investor Relations for UiPath. Kelsey, you may begin.
Speaker 2: Good afternoon and thank you for joining us today to review UiPath's fourth quarter and full year 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 Dines, UiPath's co-founder and co-chief executive officer, and the UiPath CEO ,
Speaker 2: Rob Enselin, 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 will open the call for questions. Our earnings press release and financial supplemental materials are posted on the UiPath Investor Relations website. So log in, Our
Speaker 2: These materials include gaps to non-gap reconciliation. We will be discussing non-gap 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 year 2020-2021.
Speaker 2: first quarter 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 2: 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 other reports filed with the SEC, including our Annual Report on Form 10-K for the period ended January 31, 2022.
Speaker 2: 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. We will post the slides and a copy of our prepared comments to our investor relations website.
Speaker 2: immediately following the conclusion of this call. Now I'd like to hand the call over to Rob.
Speaker 3: Thank you Kelsey and good afternoon everyone. Thank you for joining us.
Speaker 3: We ended the year with a very strong fourth quarter.
Speaker 3: reflecting the progress we have made on our strategic initiatives and the strength of our AI powered business automation platform.
Speaker 3: I'd like to thank the UiPath team and our partners for their hard work and focus throughout the year, as well as our customers for placing their trust in us.
Speaker 3: Ensuring customer success every day is the foundation of our future. ARR ended the year at $1.2 billion, driven by next new ARR of $94 million.
Speaker 3: Excluding the FX headwind of 38 million, total ARR grew 34% year-over-year.
Speaker 3: Fourth quarter revenue was $309 million. Total revenue for the fiscal year was $1.1 billion.
Speaker 3: excluding the full year FX headwind of 71 million. First-core year revenue grew 27% year over year.
Speaker 3: On the bottom line, a record fourth quarter non-GAAP operating margin of 22% drove full year 2023 non-GAAP operating margin to 6%.
Speaker 3: We believe the strong finish to the accelerator path to profitability.
Speaker 3: And serves as a baseline for our fiscal year 2024 non-GAAP operating margin outlook of 9.5%.
Speaker 3: at approximately 350 basis points.
Speaker 3: expansion year over year
Speaker 3: Executing a restructuring, driving efficiencies and streamlining our organization has increased our focus, enhanced business agility and leaves us well positioned to continue to expand our market share and leadership in automation.
Speaker 3: Driving growth at scale while increasing non-GAAP operating margins and non-GAAP adjusted free cash flow is central to how we manage the business.
Speaker 3: Our automation platform changes how organizations operate, innovate and grow, enabling our customers to quickly see a meaningful return on investment.
Speaker 3: For example, in the fourth quarter, a North American warehouse retail chain expanded their UiPath deployment, adding task mining and software robots to scale their automation program across more than 330 outlets. Wings like this are a great example of how value-selling with the right sales motion expands our footprint.
Speaker 3: in existing customers.
Speaker 3: This is where our new go-to-market structure that creates coverage density and our new sales tools like the North Star model come into play.
Speaker 3: Northstar is designed to help the team better articulate the tangible results our automation platform delivers.
Speaker 3: Northsaw is designed to help the team better articulate the tangible results our automation platform delivers, particularly to the C-suite.
Speaker 3: driving organizational focus around automation and firmly establishing UiPath as a strategic part of a customer's digital transformation journey.
Speaker 3: Northstar also helps the team expand deals.
Speaker 3: During the fourth quarter, we closed a record number of deals over 1 million, increasing our cohort of customers with 1 million or more in ARRs to 229.
Speaker 3: Customers with 100,000 or more in ARR increased to 1,785.
Speaker 3: The fourth quarter was a good backdrop for our February sales kickoff where we trained the team on the full platform and a variety of new tools to build intimacy with customers, solve outcomes, drive new logos, increase expansion and build scale through partners.
Speaker 3: Looking ahead to 2024, the team is ready to go.
Speaker 3: Our enterprise and corporate segmentation models have been rolled out.
Speaker 3: and it counts our time throughout the organization.
Speaker 3: We also continue to leverage insights gleaned from our customers with a vertical sales motion.
Speaker 3: For example, in financial services, funding a successful deployment at TD Securities,
Speaker 3: TD is now expanding automation across several lines of the business at the bank to deliver improved client experiences, productivity, and efficiencies.
Speaker 3: and in healthcare, Quest Diagnostics, selected document understanding, over other document processing competitors because of a high level of accuracy.
Speaker 3: with both structured and unstructured data to help them analyze and process millions of documents.
Speaker 3: To support our vertical strategy, we have introduced solution accelerators, which serve as templates to guide customers through deployments for common use cases.
Speaker 3: with initial offerings focused on finance, healthcare, and IT.
Speaker 3: and we plan to add additional verticals.
Speaker 3: Biltwright, a medical billing and operations company, is implementing two solution accelerators to automate the processing of healthcare-related data into administrative systems, expecting to save over 40,000 hours annually.
Speaker 3: Partners also benefit from the changes and investments we are making in our go-to-market resources.
Speaker 3: This includes global system integrators as well as more regionalized partners which not only expand our reach and scale, but are instrumental in helping customers build and execute a robust automation program.
Speaker 3: For example, ENY is helping the state of North Carolina incorporate document understanding and expand the automation program from COVID-driven use cases to back office automations across the enterprise. For more information, visit ENY.gov
Speaker 3: And as we previewed at Investaday, we are in the process of transitioning our smaller customers to our ecosystem of distribution partners.
Speaker 3: providing new sources of revenue for our partners, and De-Pay enablement.
Speaker 3: for these customers while allowing our sales teams to focus on higher value opportunities.
Speaker 3: Many of our partners also have very successful automation programs of their own.
Speaker 3: such as Capgemini and Ingram Micro.
Speaker 3: which expanded in the quarter as they continue to grow the internal automation programs and deliver our market leading capabilities to their client base.
Speaker 3: And finally, you will notice we rolled out a new positioning for our brand earlier this week which included the introduction of our new brand tagline, the foundation of innovation.
Speaker 3: This communicates not only the power of automation to transform businesses today, but also the potential to fundamentally change how quickly customers can move from idea to execution.
Speaker 3: I am inspired by how much we have accomplished in our fiscal year 2023.
Speaker 3: launching our largest platform release to date, completing the groundwork for our next phase of growth, and delivering exceptional outcomes for our customers and partners.
Speaker 3: While there is always more work to do, I believe we are well positioned to drive UiPath to the next level as we enter fiscal year 2024.
Speaker 3: With that I'll turn the call over to Daniel. Daniel?
Speaker 4: Good afternoon everyone. I would like to echo Rob's thanks to our team, customers and partners.
Speaker 4: You are all critical to our ongoing success.
Speaker 4: Before we move on, I'd like to add some color around this afternoon's 8K announcing that Chris Weber, our Chief Business Officer, is leaving you at that.
Speaker 4: This will remain with us through a transition period that ends on April 30th.
Speaker 4: the last day of our first quarter.
Speaker 4: We wish him the best and thank him for everything he has done for you iPad
Speaker 4: Moving forward, Rob will assume leadership of our go-to-market function as part of his day-to-day core CEO responsibilities.
Speaker 4: As many of you know, Rob has over 30 years of sales experience at both Google Cloud and SAP, where he built a strong track record of growing sales organizations at scale. At the same time, our Co-C-U structure has freed me up.
Speaker 4: to spend much more time with our research and development team, which is where my passion lies.
Speaker 4: We have a market-leading platform and our talent is a major competitive differentiator for us that will continue to strengthen our position in the market. I am really excited to once again assume day-to-day leadership of the R&D team.
Speaker 4: This streamlined organizational structure will allow us to move with even more agility and efficiency which is good for UiPod and for our customers' growth.
Speaker 4: teams are positioned and look forward to a strong year.
Speaker 4: Turning to the business highlights.
Speaker 4: I am gratified by our recent placement as a leader in the Forrester Wave Robotic Process Automation Report that was published in February .
Speaker 4: as the business automation platform.
Speaker 4: It also notes that we have added capabilities such as process mining, intelligent document processing, API integration and local app development to our product thereby turning it into an automation platform.
Speaker 4: The Forrester report also acknowledges that our investments in software-as-a-service deployments and re-architecturing the product to turn it cloud native are paying off.
Speaker 4: We ended the fiscal year with over 350 million in cloud ARR, including both hybrid and SaaS offerings.
Speaker 4: A great example of a cloud deploy customer is Pfizer who continues to grow and expand their automation deployment by incorporating test suite, automation hub and process mining to accelerate their delivery of operational excellence.
Speaker 4: We recently released new functionality in TestSuite to make it easier to migrate assets from legacy solutions to UiPath to provide tighter collaboration for application lifecycle management and testing tools. Not only does TestSuite open a new market in application testing for us.
Speaker 4: customer service departments. It's rolling out automation across their entire organization to improve customer service, attract and retain talent, enhance operational efficiency and launch new growth engines in B2B with automation as a service.
Speaker 4: Our customers also benefit from real-time advances in AI.
Speaker 4: The role of AI in automation is not new for us.
Speaker 4: We have made significant investment in AI for years and from inception it has been infused into every part of our platform.
Speaker 4: For example, we use AI to build large language models for capabilities like document understanding and communications mining, which we acquired with RINFOR.
Speaker 4: During the quarter, we closed the largest reinforced deal ever with the customer who plans to use it to interpret customer sentiment across millions of emails per year to reduce manual processing.
Speaker 4: client-sure and enhanced customer experience.
Speaker 4: Coming later this year, Clipboard AI shows what AI can do for knowledge workers in their day-to-day roles.
Speaker 4: by leveraging large language models and understanding the structures of content. Clipboard AI intelligently transfers data between documents.
Speaker 4: spreadsheets and apps eliminating the need for repetitive copy and paste
Speaker 4: We plan to share more on this and other AI innovations at our AI Summit later this month.
Speaker 4: We have always had an open platform and believed that the power of automation is best unlocked when you can work with every application and business system including our ongoing relationship with OpenAI.
Speaker 4: Later this quarter we plan to release a preview of our GPT connector that will allow users of our local development tools to easily utilize GPT to generate content in automations.
Speaker 4: There are countless use cases where customers can benefit from software robots that are able to write content and generate responses.
Speaker 4: Our vision is to arrive at a place where anyone can train and use AI to make their work easier and more productive.
Speaker 4: Looking ahead.
Speaker 4: The automation market presents a massive opportunity and we remain focused on building a generational business that drives shareholder value through growth at scale, margin expansion and meaningful positive non-GAAP adjusted free cash flow.
Speaker 4: With that I will turn it over to a shim.
Speaker 5: Thank you, Daniel, and good afternoon, everyone. Unless otherwise indicated, I will be discussing results on a non-GAAP basis, and all growth rates are year over year.
Speaker 5: I also want to note that since we price and sell in local currency, FX continues to be a headwind to our results.
Speaker 5: The tangible value automation creates is resonating with customers, particularly in a constrained environment.
Speaker 5: And while we expect ongoing macroeconomic variability in FX headwinds, we enter fiscal year 2024 position to execute.
Speaker 5: Turning to the fourth quarter.
Speaker 5: ARR totaled $1.2 billion, an increase of 30%, driven by fourth quarter net new ARR of $94 million.
Speaker 5: Full year net new ARR totaled $279 million.
Speaker 5: Excluding the FX headwind of $15 million, fourth quarter net new ARR totaled $109 million.
Speaker 5: For total ARR, excluding the FX headwind of approximately $38 million, total ARR grew 34%. We ended the fourth quarter with approximately 10,800 total customers, including new logos like the Dana Farber Cancer Institute, Zoeitus, Dymler, and the Bank of Madhastra.
Speaker 5: Moving on, our dollar-based net retention rate for the quarter was 123%.
Speaker 5: Normalizing for FX and excluding the impact of Russian sanctions, our dollar-based net retention rate was 129%.
Speaker 5: Dollar-based gross retention of 97% continues to be best in class.
Speaker 5: Revenue grew to $309 million. Normalizing for the FX headwind of approximately $14 million, revenue grew 12%.
Speaker 5: For the full fiscal year, we reported revenue of $1.1 billion, an increase of 19% year-over-year.
Speaker 5: Normalizing for the year-over-year FX headwind of approximately $71 million, full fiscal year revenue grew 27%.
Speaker 5: Remaining performance obligations increased to $894 million. Normalizing for the FX headwind of approximately $18 million, RPO grew 34%.
Speaker 5: Current RPO increased to $562.5 million. Fourth quarter total gross margin was 87%, reflecting ongoing investments in support and cloud infrastructure as we scale the business.
Speaker 5: Software gross margin was 93%. Fourth quarter operating expenses were $199.5 million. We ended the year with 3,833 total employees. GAF operating loss of $45 million included $99 million of stock-based compensation.
Speaker 5: Full year GAAP operating loss was $348 million, including $370 million of stock based compensation.
Speaker 5: non-GAAP operating income was $69 million, resulting in a record fourth-quarter operating margin of 22%.
Speaker 5: Full year non-GAAP operating income was $65 million, or a 6% operating margin.
Speaker 5: As Rob said, our results reflect the positive impact of our restructuring efforts combined with a continued focus on discretionary cost management and resource allocation that prioritizes higher return initiatives.
Speaker 5: Fourth quarter non-GAAP adjusted free cash flow was $101 million. And for the full fiscal year, non-GAAP adjusted free cash flow was neutral, in line with our stated objective. We have a very strong balance sheet, which is an important asset in the current operating environment.
Speaker 5: with $1.8 billion in cash, cash equivalents, and marketable securities, and no debt.
Speaker 5: Now, let me turn to guidance. For fiscal year 2024, we have maintained the top-line growth rates we committed to at Investor Day and included a nominal increase as the dollar has weakened since late September . We are also assuming the macroeconomic environment does not improve, including weakness in North America.
Speaker 5: and that the Salesforce repositioning builds momentum as we move throughout the year.
Speaker 5: And finally, we have meaningfully accelerated our path to 20% plus long-term non-GAAP operating margin, as we now expect fiscal year 2024 non-GAAP operating margin of 9.5% and non-GAAP adjusted free cash flow margin of 8%. For the fiscal first quarter 2024, we expect…
Speaker 5: ARR in the range of $1.245 billion to $1.250 billion.
Speaker 5: revenue in the range of $270 million to $272 million, non-GAAP operating income to be approximately $5 million, and we expect first quarter basic share count to be approximately 558 million shares. For the fiscal full year 2024, we expect ARR in the range of $1.425 billion to $1.430 billion, revenue in the range of $1.253 billion to $1.258 billion, non-GAAP operating income to be approximately $120 million.
Speaker 5: Before I close, I want to leave you with modeling points and our management philosophy.
Speaker 5: Starting with fiscal 2024 modeling points, we expect the year-over-year foreign exchange headwind to continue in the first quarter.
Speaker 5: First half net new ARR to be approximately $100 million.
Speaker 5: First half revenue to be approximately $555 million.
Speaker 5: Second half net new ARR and revenue to reflect similar seasonality as fiscal year 2023.
Speaker 5: Full year non-GAAP gross margin to be approximately 84%.
Speaker 5: non-GAAP operating income to reflect similar seasonality as fiscal year 2023.
Speaker 5: And, fiscal year 2024 non-GAAP adjusted free cash flow of approximately $100 million. Please note, we expect non-GAAP adjusted free cash flow to be positive for all quarters in fiscal 2024 and to follow normal seasonal patterns which ramp into the fourth quarter. As a reminder,
Speaker 5: We started amortizing sales compensation expenses at the beginning of fiscal year 2022, which creates a 200 basis point headwind to non-GAAP operating margin in fiscal year 2024 relative to 2023.
Speaker 5: Finally, we are actively managing stock-based compensation to lower dilution, which we expect to be in the range of 3% to 4% year-over-year for fiscal year 2024. Looking ahead, we anticipate to continue to calibrate the need for competitive compensation packages while reducing overall dilution.
Speaker 5: In closing, we are committed to managing the business to the Rule of 40 Plus, which we believe we can achieve given the strength of our global team, our market leading automation platform, the power of our financial model and the size of our market opportunity.
Speaker 5: With that, I will now turn the call over to the operator. Operator, please poll for questions.
Speaker 1: Thank you. And ladies and gentlemen, at this time we will be conducting a question and answer session. Please limit yourselves to one question and one follow-up question per each time that you queue.
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Speaker 1: Our first question comes from
Speaker 1: Rymo Lenchel with Barclays, please state your question.
Speaker 6: Hey, thank you. Congrats. That was a very strong finish. My question was like the last few weeks we had a lot of news flow and news items around the advancement in AI with JetGPT, etc. Can you remind us please like how you're playing in there in terms of either doing it yourself or partnering with the other guys? And how do you see…
Speaker 6: the evolvement of AI there for your own business. Then I have one follow-up. Thank you.
Speaker 4: Hey, I'm well, this is Daniel. Well, the actual news is unusual to start talking about technology in our early school, but I think that's a great sign. I'm actually very excited on the progress that is happening on the field.
Speaker 4: As you know, we are heavy users of AI and we have really solid research and development arm around AI for the past five years. We have kind of the best AI in the world when it comes to computer vision to understand application screens.
Speaker 4: And with this new advance in generative AI, I think the best platform will be the most favored. Because generative AI, it's basically a creator tool. So in our case, this is gonna accelerate.
Speaker 4: the adoption of our platform. It's going to help democratize.
Speaker 4: the access to creating automations. And if you feel in the same time.
Speaker 4: Why you are not using the best tool out there when you can have the AI to drive faster adoption? So I think this combination between AI and the tool that the platform that is capable of fulfilling with AI commands, it's a great combination.
Speaker 4: We're looking forward to continue to infuse generative AI across our platform. I would like to emphasize the use of GPT-3 and large language models in our upcoming clipboard AI. And this is gonna be a tool that chatter to all business users.
Speaker 4: basically will allow everyone to transfer information from any source, every document to any application. Imagine many, few dozen fields converted, transformed in one step. It's gonna save tremendously in terms of productivity. And we are using a huge combination of our own AI models.
Speaker 4: GPT-3, Google, Amazon, everything that is combined there. So I'm, again, I'm extremely bullish for the prospects of UiPath with adopting the generative AI technologies.
Speaker 6: Okay, perfect. Thank you. Thank you for that Daniel and great to get it from you. The other question is for Rob. With Chris leaving, as far as we understood, like Chris' role was to make the sales more e-commerce driven to kind of have a better kind of more efficient way to go into the mid-market.
Speaker 3: our plan with the go-to-market organization, both Daniel, myself, and Chris, and we are well on our way with that transformation.
Speaker 3: So I would say there's going to be minimum disruption to the field. We feel really good about the execution. The team is really positive about the progress we've made from investor day and where we continue to make. And we will set up for the future. Plus, we've brought in a significantly strong leadership team.
Speaker 3: And with them reporting to me, we all feel like we can actually execute even faster, get closer to customers, and deliver even more value to our customer base. And I would like to add that.
Speaker 4: Having Rob here, and Rob is known to everyone that he is one of the best go-to-market leader on this planet, having the opportunity to have Rob leading directly, go-to-market as part of his day-to-day responsibilities.
Speaker 4: It's actually great news for us. I think we continue to streamline this company. I think this is the right size of the company right now and we are really poised to more efficiency and to even accelerate our growth profile.
Speaker 1: Thank you. Our next question comes from Keith Weiss with Morgan Stanley . Please state your question. Great. Thank you. This is Dion for Keith. I want to ask on your Q1 guide, it looks really healthy entering the year.
Speaker 7: And so I was curious, since we already have mid-March now, is there any color you can sort of provide on what you're seeing a few weeks into the quarter here? How is the demand environment shaping up and how are you executing out there?
Speaker 5: So, thanks for the question. We see the environment very much the way we saw it in October . In our Q1 guide, we've actually accounted for foreign exchange, the continuation of foreign exchange pressure, particularly in Q1, but also just assumed the same variability in the macroeconomic environment.
Speaker 5: And overall, we've given an extra actually buffer of conservatism in there or a little extra buffer to account for the environment that's there. So our philosophy has been the same. We've guided to what's in front of us while still accounting for a little buffer for the variability in the macroeconomic environment. That's great to hear. And then maybe one more question on the net.
Speaker 5: basis of any levels where we could see that stabilize? Yeah let me start and I'll turn it over to Rob. So you know reported net net dollar retention rate of 123%. You know again foreign exchange has pressure on that number when you normalize for foreign exchange is actually at 128%.
Speaker 5: And we see that our incremental ARR continues to be driven by the highest propensity, the customers with the highest propensity to invest in automation. And especially in the Global 2000 Fortune 500, we've had a record number of million dollar plus deals, which I think is great momentum.
Speaker 3: And I would just add, you know, I've spent a lot of time in Europe and Asia in January and I would tell you that the customer discussions are at a significant sea level discussion. The platform is resonating with customers, the brand around Foundation for Innovation is resonating with customers and in this environment, I feel really good about where our product is positioned within our customer base.
Speaker 7: Excellent, thank you.
Speaker 1: Our next question comes from Kirk Matern with Evercore ISI. Please state your question.
Speaker 8: Hey, this is Chirag, on for Kirk. Thanks for taking the question and congratulations on the strong finish to the year. Going off the prior question, are you noticing any differences in the growth and expansion of different customer cohorts?
Speaker 8: Meaning, are newer customers perhaps lower at growing on the platform when compared to early adopters or vice versa? Are there any trends that you might note here? Our cohorts have actually behaved pretty relatively similar. The general customer journey is a land size of around 25.5 million.
Speaker 5: Chirag, sorry, is around $25,000. And from there, we see customers expand their use cases similarly and kind of move up that curve very well. The older the customers, that's where you see the seven-digit and the million-dollar-plus deals kind of move as they have more confidence internally.
Speaker 5: about their ability to scale automation and the culture moves in that direction. Our platform also continues to help that. I think the addition, you know, the continued maturation of process mining, task mining, broadening with the re-infer acquisition, you know, our platform adds more value. And so we do see more customers interested in...
Speaker 3: It has had a big impact. And I would also just say that in an environment we're operating in right now, many of the larger customers are into what I call a stack consolidation, and our platform fits nicely into that process. As customers continue to find ways...
Speaker 3: to innovate from the existing environment. So this is all good for our platform.
Speaker 8: Got it. And maybe if I could just sneak one more in here. Ashim, can you talk to the factors that are driving operating leverage expansion within your business and the Stronger Than Expected Margin Guide that's making you confident in looking ahead?
Speaker 5: I think the team's done an incredible job execution. Like I think every UiPath employee understands that operating leverage from goes from delivering value to our customers and starts with the top line while managing expenses and finding more ways to be efficient. What I think we're really proud about in fiscal 2023 is our ability to execute and streamline the organization.
Speaker 5: actually is just a natural result from that. When you look at fourth quarter, it speaks to that in the numbers. And that's why you see our operating margin really strong. I do want to make a note, you also see it supported by strong free cash flow generation. And I think that we look at both of those items and we've also noted in our guidance this year.
Speaker 5: that we look at every quarter to be positive from a cash flow standpoint, and that's just, you know, from working both of those muscles simultaneously. Thank you, and our next question comes from Matthew Hedberg with RBC. Please state your question. Great. Thanks for taking my questions, guys. Congrats on the results. Yeah, I wanted to look, you know, outside of U.S., could you give us a sense for the opportunities in sort of, like, broader EMEA and APJ just in terms of...
Speaker 3: we have in the team. We also started to see, as I mentioned early on, significant discussions around platform with larger companies wanting to actually go all in with the UI path from an RPA and expand into the other areas of our solution. We've also seen significant interest in attended automation. Strangely enough in markets like Denmark and Sweden, rather than just UMaine, we thought it was going to be great.
Speaker 3: In the Asia-Pacific market we've made some adjustments according to what we said at investor day. Leah's on board now, probably Lee Hawksley's on board about three months. We've got some new leadership in India, new leadership in Southeast Asia and I would say we're at the very beginning of that but cautiously optimistic that we can take the work that we've done in Europe and in North America.
Speaker 5: and execute pretty well in Asia Pacific as well. Got it. Thank you for that super helpful. And then, Ashim, for you, you guys have a diversified base of users, but can you give us a rough sense for exposure to both sort of the tech and financial services vertical? Yeah, I mean, the banking financial vertical is...
Speaker 5: is a strong vertical for us. We've talked about, we've given some of those figures historically. We don't disclose them on a quarterly basis, but they're one of our largest segments, financials and healthcare. Just to qualify a little bit, when we look at the exposure, like it's kind of we've evaluated it, a lot of our major customers are in the large institutions like JP Mortley.
Speaker 3: some of the major banks that are out there. And so with that, we feel really good about our position of where we are there right now. I would just add to the financial services, that when you look at the opportunity to drive efficiencies in financial services, I think we add a tremendous amount of value in that we seek a solution set like document understanding, having huge benefits in healthcare and insurance because of the straight through document processing that we can achieve. And the results.
Speaker 3: with our North Star value proposal is having a difference in financial services, insurance, and health care. Thank you. Our next question comes from Brian Bergen with TD Cohen. Please state your question. Thanks for holding.
Speaker 9: Hi guys, good afternoon. Thank you. I wanted to follow up on margin first. So can you just bridge what you did in 4Q here, the strong 20% plus, how you planned out for fiscal 24 and specifically if you can maybe talk about the areas of cost efficiency that you benefited most from here in 4Q.
Speaker 5: And then any of those benefits that don't recur initially in 24 or areas that you are leaning back in to invest. Yeah, I think that I will always emphasize, I think our operating margin starts with delivering in the top line. You know, which we have all of our teams focused and we have this market in front of us that allows us to deliver numbers.
Speaker 5: like the revenue number we did. Brian , in terms of the specific cost areas, frankly we had cost productivity across the board.
Speaker 5: And I really want to just emphasize, I think, from product and engineering to GNA, to sales and marketing, every team has contributed in the right way. Most of what we have seen, like everything that we have realized, we look at that as something that is recurring. There are some always some timing elements that go into a quarter, such as...
Speaker 5: sales commissions, accruals, those types of things that have some accounting associated with it in terms of seasonality. But all of the efficiencies that we've seen in terms of rationalizing organizations, streamlining organizations, finding productivity and discretionary costs, those are things we see as sustainable as we go forward. And that's why we feel really good and confident about the 350 basis points that we're expanding.
Speaker 9: the year, even off of a higher beat in fourth quarter for where we ended. Okay. And then on the product, Denny, can you talk about client appetite that you've seen around discovery products? And I heard a reference customer there, I think, around communications mining. So I'm curious how you would compare the uptake of that product versus what you saw in the past around.
Speaker 4: Having steady progress, first of all in process mining, we have released a great version on the cloud and we are really bullish on our prospects on...
Speaker 4: being a sizable player in the process mining market. We have been one of the first company to invest in task mining, and this is one of the most ambitious AI.
Speaker 4: project that we have ever attempted and the new transformer based models give us even better hopes and to...
Speaker 4: into getting more of the task mining. To a quick reminder, what we are trying to achieve is basically watching over the shoulder, people doing business processes by AI and figuring out the processes themselves.
Speaker 4: In communication mining, it's our latest addition to the platform by acquiring REINFER. Again, it's a large language model based on transformers. We are seeing great traction, especially with some of our large customers, especially with the young competitors.
Speaker 4: customers that use our communication mining technology to classify millions of emails and taking action based on the emails. So again, this shows the power of an integrated platform. You discover and then you automate and ultimately you operate.
Speaker 4: To me, it's a great point that our bets three or four years ago on this platform is becoming successful today.
Speaker 1: And our next question comes from Michael Turin with Wells Fargo Securities. Please state your question. Hey great, thanks for taking the question, much appreciated. In terms of just the growth guide, Ashim, we can appreciate that there have been a lot of improvements that you've put in place.
Speaker 1: You're guiding for 10% up to 18% for the full year on the top line. Can you just maybe level set how much of the growth improvement comes from some of the go-to-market and product changes we've been talking about since the investor day versus the math of lapping some of the headwinds you've experienced and just how to think through the progression there? Dr. Tom Nagelowski from Thursday img ideas for swell
Speaker 5: Yeah, so maybe just if I start, I think we finished fiscal year 23 at 19% revenue growth, and we encountered a significant FX headwind in 2023, so that helps to level off, Michael. So adjusted for that, actually, we feel like it was a good delivery in 2023.
Speaker 5: That being said, when we look at our guidance philosophy, we talked about 18% at investor day. We accounted for the weakening dollar within our guidance. We adjusted and put an additional buffer for the macroeconomic volatility.
Speaker 2: 2024 and we continue to guide to see what we have in front of us with those qualifications. Yeah, and I just, this is Kelsey, I want to step in quickly. We gave a lot of very specific modeling points in the script, which I think will be very helpful to you as you put your models together tonight. So we will post all of that information on our prepared remarks to the website.
Speaker 9: as soon as we're finished tonight. And if you have any questions, please feel free to reach out to us. I think this will help you put your FY24 model together. That's very helpful. Just a quick follow-up on margin. I mean, obviously, the Q4 margin results are strong and stand out. The expansion targets.
Speaker 1: for the year in line with the targets that were presented with the investor day. Still strong expansion, but with the second round of cost reductions that went into place in November , were those something that was contemplated alongside the investor day targets, or can you just help us understand if there are areas of reinvestment on the product side or other things that you're also contemplating.
Speaker 5: from last year into this year. Now, are there areas that we invest in? Yes, and that's why we continue to look for opportunities to streamline the organization. And every UiPath employee continues to look for areas of efficiency together, particularly in our discretionary spend. So that's kinda how we've looked at it. I would say all of our actions have been baked in.
Speaker 5: We will invest in the areas needed to execute and to continue to take advantage of the market, opportunity that we see in front of us, but we feel like we can relatively fund that to keep the size of the organization relatively similar. Thank you. And our next question comes from Mark Murphy with JP Morgan, please say your question.
Speaker 10: Hey guys, thanks for taking the questions. This is Arti Wuhan from Mark Murphy. Congrats on the quarter. Just wanted to call out, in the past six to nine months, both for UiPath and a lot of other vendors, we've heard that customers are kind of really kind of slowing down and trying to pick the right tools and then kind of going all in on them. And you guys have been kind of focusing on the post-sales motion. So some of the success we're seeing, clearly in your results, just from the changes you guys have made to the sales.
Speaker 3: Yeah, I mean, I think we laid out very clearly that at investor day where we were going, what we were going to do around pricing, packaging, the segmentation of the organization, the execution around the growth products and delivering on the platform. We feel like we've executed really, really well around that.
Speaker 3: The environment, part of the question already is if the environment hasn't changed, we're kind of cautious about the environment, we've continued to focus on driving the forecasting at the right approach, making certain that our investments are focused on the right level, that we're actually connecting to the C-level customers, and that we're actually part of the budgeting cycle.
Speaker 3: And that's what we focused on. And I think that's paying dividends. But I'd also just say as well, when we launched 2310, which was the technology platform, that allowed us to be competitive in the discovery area. And we absolutely are starting to see some, real traction with test suite and document understanding, and the re-infer product in the marketplace. I would say that our customers are looking for an automation platform is what I've said from the very beginning. Automation is...
Speaker 3: We feel like we're on top of contract renewals. We don't see any significant changes in the contract renewals. Our customers, we continue to focus on expansion as well as a key aspect for our existing customers and we'll continue to drive expansion. We think we have significant upside in
Speaker 1: in the existing customer base as well. Thank you. And ladies and gentlemen, in order to get in as many questions as we can, please limit yourself to one question for each time that you queue up for a question. Thank you. Our next question comes from Brad Sills with Bank of America Securities. Please go ahead. Oh, wonderful. Thank you. I wanted to ask if you could provide an update as to any support to any questions that came in.
Speaker 1: Which of those solutions that you're selling into under the new go-to-market? Are you seeing success? Obviously, some big changes to more solution selling approach. We'd love to get any color as to which verticals or solutions are you starting to see success with? Which ones should we see as more up and coming? Thank you.
Speaker 3: Hi Brad, good question. A document understanding, as we mentioned earlier, a document understanding we're seeing significant traction in document understanding. The value proposition around it is very clear, it's almost crystal clear in terms of the value customers can receive. Our straight through processing is really high. When you have customers that have significant invoice or payment systems or claims payment systems, you see significant value.
Speaker 3: At TestSuite, we're seeing value in that. That's actually very unique in an automation space, is nobody that connects testing with automation, so that's significant. And then, companies like E&Y, where they've used a process mining solution with the audit practice and we've seen process in that. I would say overall though.
Speaker 3: is we see more and more companies start to look at the platform as an opportunity. Enterprise license agreements are becoming more significant in the discussion. We're having a lot more discussions where customers look and say, when you look at their full stack, can your process mining test, mining document understanding, can it replace many of these other applications?
Speaker 3: in a platform, make it more consistent, easier to implement, faster to implement. And then on top of that, I would say our solution accelerators are actually starting to have an impact as well as we help customers achieve their automation results much faster.
Speaker 1: Thank you. Next question comes from Terry Tillman with Truer Securities. Please state your question.
Speaker 11: Yeah, thanks. I will give you the one question, but I can't help myself. I really do appreciate Ashim, all the color on the first half and second half. Hopefully, our motto won't be so out of whack going forward then. It's very helpful. I guess, Rob, for you, the question I would have is, you've got a lot on your plate in terms of the go-to-market efforts, and now you're kind of taking the role as chief business officer as well, so you've got a ton on your plate. But what about partners? I know at the low end, partners are important to take over first-line customer engagement.
Speaker 11: but these global SIs or the regional boutiques or the ISVs, it seems like with some of these products like document understanding, I mean you have a really good opportunity to really partner together and drive a lot of incremental revenue. So what are you doing or what are some guideposts on partner side of this go to market transformation you are working on? Thank you. Yeah, good question.
Speaker 3: So I believe we made significant progress with partners like E&Y. I was on the automation, the worldwide automation, I guess, event yesterday with E&Y, which is touching, I think, five or six markets around the world. Over 1,200 of the customers there. We were talking about how automation can help deal with inflationary.
Speaker 3: different economic disruption that customers are taking, take labor arbitrage and so on. So I feel like we're making significant progress with partners like ENY. I would also say with Accenture, we're making progress. They continue to be fully supportive, incredible opportunities in Europe as well with Accenture. We're starting to see that.
Speaker 3: they play through and many of the others are also now starting to see automation as a big play. You know, when you look at how a partner sees the automation space, in the past they saw it in terms of many different products, many different types of solutions trying to solve and now they see UiPath as a go-to player in the automation space to help drive customers.
Speaker 3: And there's nothing that can drive business results faster than automation. You can get it often and you can get it on top of many other solutions. So it's non disruptive in many ways. And in my discussions in Europe ,
Speaker 3: As I said, I've started to see a significant amount of discussion as well, not only in terms of those discoveries, those growth products, but also in terms of attended automation to solve constraints in the healthcare environment and how they are dealing with different levels of labour shortages in those markets.
Speaker 1: Thank you. Our next question comes from Michael Turitz with KeyBank. Please state your question. Hey, this is Billy on for Michael. Just wanted to ask how you're thinking about new versus expansion going into next year. Thank you. Yeah, we've kind of – I would just assume the same split that we historically have, which is the 70-30 split for our net new ARR.
Speaker 3: That's the assumption I think we continue to have and it's been fairly consistent. Yeah, I would just add to that. There was a question earlier around e-commerce and distribution. We are distribution partners, I should have answered this. Our distribution partners are actually investing more in markets and they're actually starting to see bigger upside opportunities in that space so we feel positive about the acquisition of customers as well. And remember we always said that we were gonna focus on creating a highly efficient density model as well.
Speaker 1: There are trends on those like relative to maybe how you sold the platform historically just didn't know if you've seen any changes either up or down, you know in terms of how you're able to land with those versus Yeah, so, you know, so So Scott on that I would say we've we now I think between 10 and 16 solution accelerators are in the in the market
Speaker 3: We've seen significant uptake on them, on the marketplace, sorry. And we've seen significant uptake on the solution accelerators. And as I said, you know, very early on, we've continued to bring them out at the speed at which customers are using them. They are driving the bigger opportunities that we're working on. We don't actually charge.
Speaker 1: Thank you. And ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to management for closing remarks. Yeah, this is Robert here. I just want to thank everybody. Appreciate your time and I really look forward to spending time with many of you over the next couple of weeks from Daniel, myself and Ashim and Kelsey.
Speaker 3: Thank you. And ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to management for closing remarks. Yeah, this is Robert here. I just want to thank everybody. Appreciate your time and I really look forward to spending time with many of you over the next couple of weeks from Daniel, myself and Ashim and Kelsey. Thank you everybody.
Speaker 12: Thank you. This concludes today's conference. All parties may disconnect. Have a great day.