Q3 2025 UiPath Inc Earnings Call
Greetings and welcome to the you Ipass third quarter 2025 earnings conference call. At this time, all participants are any of those should only mode.
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Speaker Change: It's now my pleasure to turn the call over to Monica Gould Investor Relations for U Ipass. Please go ahead Monika.
Monica Gould: Thank you good afternoon, and thank you for joining us today to review U Ipass third quarter fiscal 2025 financial results, which we announced in our earnings press release issued after the close of the market today.
Monica Gould: On the call with me are Danielle Dana you, Ipass, founder and Chief Executive Officer, and Ashish Gupta, Chief Financial Officer, and Chief operating officer to deliver our prepared comments and answer questions.
Monica Gould: <unk> press release and financial supplemental materials are posted on the U I pass Investor Relations website.
Speaker Change: <unk> got you I pass dotcom decent.
Speaker Change: These materials include GAAP to non-GAAP reconciliations, we will be discussing non-GAAP metrics on today's call.
Speaker Change: Afternoon's call includes forward looking statements, including regarding our financial guidance for the first quarter fiscal 2025, and our ability to drive and accelerate future growth and operational efficiency and grow our platform product offerings and market opportunity actual results may differ materially from these.
Speaker Change: Those expressed in the forward 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.
Speaker Change: Please refer to our annual report on Form 10-K for the year ended January 31, 'twenty 'twenty four and our subsequent reports filed with the SEC, including our quarterly report on Form 10-Q for the period ended October 31, 'twenty 'twenty four to be filed with the S. E C.
Speaker Change: Forward looking statements made on this call reflect our views as of today and we undertake no obligation to update them I.
Speaker Change: 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 immediately following the conclusion of this call.
Speaker Change: In addition, please note that all comparisons are year over year, unless otherwise indicated.
Now I would like to hand, the call over to Daniel.
Daniel: Thank you Monica.
Daniel: Afternoon, everyone. Thanks for joining us.
I want to take a moment to thank our team.
Daniel: Prove the execution and our customers and partners for everything they do to make you eyeball sexes.
Daniel: Our third quarter results exceeded the high end of old guidance across all key financial metrics are testament to our improving execution and the compelling value that our AI powered automation plus one that leaves us to our customer.
Daniel: We ended the quarter with.
Daniel: 016 billion, an increase of 17% driven by net new <unk> of 56 million.
Daniel: Third quarter revenue was 355 million and we delivered non-GAAP operating income of 50 million.
As many of you have seen we unveiled our vision and roadmap for agenda automation, a door for or user conference.
Daniel: Oh book in the coming months, the entire U I puff community will be able to build mandate and deploy agents significantly expanding the surface.
Daniel: Automation with the company's.
Daniel: This will mark our most consequential product launch in years, Hey agents will be first class citizen well now our platform.
Daniel: They will use UI, Bob robots to securely access corporate systems and databases to harvest information for agents to Exxon.
Daniel: Our customers are already embracing the evolutionary potential of Europe up agents with enthusiasm.
Daniel: A large global customer, who recently told us that this shift towards agenda automation is not just an upgrade it's a paradigm shift in how we perceive the potential of our operations.
Daniel: Customers are excited about the agility and creativity that our agents bring another co imported by the security governance compliance and the curious see afforded by our robots and our overall block before.
We are excited.
Daniel: H M B a lift it's begun accepting registrations for all of our private preview, which will begin later this month we've.
Daniel: We've had the faith the fastest space and the largest number of registrations in our company's history with over a thousand organizations signed up so far.
Daniel: As an example, two weeks ago.
Daniel: One of the customers we hosted at our headquarters in New York City is the head of a fortune 50 healthcare.
Daniel: And the insurance company.
Daniel: Following their most of our new agenda automation capabilities, including H M builder and genetic orchestration.
Daniel: The health care company is moving quickly to put our new agenda capabilities to war.
Daniel: I believe that we have.
Daniel: Genetic automation.
Daniel: The long tail of complex unstructured task to automate them in hands is now in play.
Daniel: I'm sure you have heard announcements from software companies announcing single agents that will help such they thought across the CRM or submit an expense report.
Daniel: What differentiates you wipe out all three things.
Daniel: First our agents and robots work across all applications, both new and legacy eliminating vendor lock in for all of our customers.
Daniel: Business processes today don't run on a single system.
Daniel: We will continue to be the Switzerland of business applications and agents, providing equal access to third party systems.
Daniel: Its governance agenda orchestration will be the conductor, where the governor across agents robots people and models.
Daniel: Sure.
Daniel: We will democratize access to agents by leveraging our low cost platform that is already known to automation developers.
Daniel: The feedback from industry analysts has also been encouraging.
Daniel: D. C is already forecasting the market for a genetic leg or automation to grow to 4.1 billion by 'twenty two NDA from zero last year.
Daniel: This is on the top of the RP a market inclusive of IDP in test automation. This is growing at the double digit rate. Thanks to the state of wins and disruption of journey II.
Daniel: The direction of the market can be seen in our current customer conversations and deals.
Daniel: We're really excited that our largest deal in the quarter was four building an adjunctive use case they'll leave work via or autopilot for everyone for a health care customer who has been with us since 2018, our solution will enable such use cases to build easy and fast.
Daniel: As we deliver on our product roadmap.
Daniel: Hey, it's always been the center of the whole cloth for over the last few years, we have integrated Jimmy I la with our plus four including IDP and we are now seeing the fruits of those efforts.
Daniel: With the support of their C. I O Volkswagen financial services will now standardized on the UA bus platform across the company.
Daniel: They will implement our IDP products in the cloud to automate customer communications.
Daniel: Complaint management.
Daniel: Auto pilot also offers the potential for over 5000 employees to increase productivity. So far the company has realized cost savings.
Daniel: Well over 10 million euros per year, and increase customer satisfaction suites online portal and financial services business.
As forward, we also announced the agenda the availability of autopilot for everyone. Our agent with a conversational experience that enables any employee regardless of technical ability to complete accomplish stocks ranging.
Daniel: From getting answers granted with their own organizations data analyzing and extracting information from documents automating copy paste into apps and running automation to improve productivity.
Speaker Change: Protiviti, a longtime customer and platinum partner.
Suddenly expanded its usage of and capabilities and our technology, including auto pilot with the express purpose, that's enabling the consultants better use automation to deliver value to their customers.
Speaker Change: Clothing number rose as a service models.
Speaker Change: And putting leading edge automation technology into the hands of their operations teams.
Speaker Change: Our logistic capabilities with permeate across our platform and continue to differentiate us.
Speaker Change: Great example of this is our test automation capabilities.
Speaker Change: In fact, our agenda tasty offering is positioning us as the thought leader in the test automation industry.
With the addition of autopilot for testing or do you have this year, we greatly enhanced the AI powered capabilities of our test suite.
Speaker Change: With the ability to automatically generate test cases or offering with envelope a key market for us as we look to build upon our momentum in the agenda the automation era.
Speaker Change: B Braun one of the worlds, leading medical technology companies and the customers since 2019 selected they sweep Cortez case creation to aid in testing for their S. E T S for migration.
They expect to see significant cost savings from eliminating manual testing with additional improvements in employee engagement and experience.
Speaker Change: Our slots for ability to integrate automation and testing was the key differentiating factor over other competitive vendors.
Speaker Change: I have become increasingly convinced that manual testing remains real sizable roadblock for business agility I.
Speaker Change: I'd like to focus the remainder of my comments again on the launch of agenda automation over the next few months, our partnership with S AP and our overall partner ecosystem.
In February we plan to unveil a.
Speaker Change: Agent builder in public preview it will be launched as a core part of UA power studio.
Speaker Change: You can go with customers.
Speaker Change: Seamless experience for them.
Speaker Change: Both robotic agenda automation agent buildup allows users to build agents either from scratch in our low code development environment, where from a pre built templates in the UA buff agent capable that work in tandem with our robust.
Speaker Change: Customers will also be able to include third party agents in their agenda workflows, if they choose.
Speaker Change: To maximize the value of a genetic workflows will also launch agenda orchestration, which empowers organizations to orchestrate their long running.
Speaker Change: Complex enterprise processes across few months robots and agents and operate them with Gulfport mines and at scale across systems of engagement and systems of record.
Speaker Change: Customers can orchestrate agents build either using the UA plus agent builder platform as well as agents built using other platforms.
Using our new agenda orchestration capabilities customers can design implement and monitor operate on optimized complex business processes.
Speaker Change: The entire process lifecycle, we are planning a public preview of a genetic orchestration and the first quarter of fiscal 2026.
Speaker Change: As you can see our focus is on enterprise because they agenda automation, where security governance control and compliance ran through all everything we do for all of our existing community of 3 million users.
Speaker Change: Jumping in and getting started building managing and deploying agents will be straightforward.
Speaker Change: I expect we will quickly have a large pool of developers building through a genetic waterfalls across business critical processes.
We are also committed to reach customers that are less aware of our plots for particularly in today's C of a gen Z E marketing.
Speaker Change: And we are investing in driving awareness of our capabilities.
Speaker Change: We won't have a growing stream of use cases that will quickly underscore our capabilities and differentiation.
Speaker Change: Partners.
Speaker Change: A cornerstone of our go to market strategy.
Speaker Change: They bring us to scale, our market reach and elevating our customer success initiatives.
Speaker Change: And I am excited about with our continued progress with S. P.
Speaker Change: In October our platform was integrated into the Asap build process automation solution and is now being sold as one of the ACP solution extensions or Salt lakes there.
Speaker Change: Liberating a seamless experience for ACP users to create execute unmonitored automation from a single platform.
Speaker Change: Integrated solution enables true end to end automation across diverse IP landscapes improved efficiency and productivity across Asap and non ACP workloads.
Speaker Change: It also reduces long term total cost of ownership within the supportable Gulfport noble approach that moves custom code to the automation layer and faster implementation.
Speaker Change: Leverage pre built solution accelerators.
Speaker Change: Partnerships takes time to build.
Speaker Change: Pipelines to get but our S. E. T partnership has already helped us to win new logos such.
Speaker Change: Such as a leading data storage company based in the U S, which needed support following the S. Four on our transformation.
Speaker Change: They will now be implementing UA path.
Speaker Change: Automate processes with U S C P such as their finance them supply chain functions.
Speaker Change: In addition to helping secure new logos our partners also supports expansions.
Speaker Change: One that I would like to highlight is the deal facilitated by S. C. P. We've one of the largest U S oil and gas companies.
Speaker Change: The company currently has over 1000 automation in place with their finance and downstream operations and have not chosen we expend four book with you a path to automate within the S. Four on the environment.
Our GSI partners also continued to drive our growth in the market with the support of <unk>.
Speaker Change: Why so.
Speaker Change: <unk> automotive one of the largest car dealership groups in the U S expanded their automation program to additional departments, such as customer service share services and human resources.
Speaker Change: They will also be expanding their usage of document understanding for why don't <unk> constellation and factually invoice processes, while adopting new products such as process mining communication mining and test suite for automation testing they.
Have seen an impressive ROI of over 10 million in cost savings per year with expectations for further improvement.
Speaker Change: And finally, our success is deeply rooted in our ability to serve our customers, making a customer centric mindset more crucial than ever.
Speaker Change: While customer Centricity and core innovation will remain a core pillar for US today, we are working diligently to infuse it deeper into our culture.
Speaker Change: To us being customer centric means listening rapidly applying feedback queen of vaping, our roadmap and building a trusted partnership.
Speaker Change: All of this in the spirit of maximizing the value our customers realize from our offerings.
We believe will translate to growth for <unk>.
Speaker Change: To summarize I'm really excited about.
And fully out of them from our customers in support of our vision and the products, we have on deck to deliver on the vision.
Speaker Change: We believe that agenda automation will have a major impact on the workplace and it is clear that is only going to rapidly become more powerful and sophisticated.
Speaker Change: We are confident that you ipass is well position to bring the transport multi force of AI to life in the enterprise football with automation.
Speaker Change: With that.
Speaker Change: I'll turn the call over to Ashish.
Speaker Change: Dive more into our operational priorities and financials shim.
Ashish Gupta: Thank you Daniel and good afternoon, everyone.
Ashish Gupta: Unless otherwise indicated I'll be discussing results on a non-GAAP basis, and all growth rates are year over year. I also want to note that since we price in sell in local currency fluctuations in FX rates impacted results.
Ashish Gupta: Turning to the third quarter are our totaled one six year of $7 billion, an increase of 17% driven by net new <unk> of $56 million. We ended the quarter with approximately 10790 customers and are pleased with our focus on the quality of new logos, we are acquiring.
Ashish Gupta: Such as amplitude Aqua dermatology the hospital for special surgery, and Ventura Foods.
Ashish Gupta: Moving to customer moving onto customer metrics customers with $100000 or more in <unk> increased to 2235, while customers with a million dollars or more in air are totaled 300 in Q.
Dollar based gross retention of 97% continues to be best in class and our dollar based net retention rate for the third quarter was 113%.
Ashish Gupta: Our platform's ability to help customers obtain meaningful value with AI powered automation continues to drive expansion opportunities. A great example is allianz technology, our customers since 2017.
Ashish Gupta: A recently implemented communications mining and document understanding to automate their policy renewal and new business request processes and after a successful implementation they will be now moving to the cloud to expand their usage and automate these processes enterprise wide.
Ashish Gupta: Additionally, the U iPad platform will now be standardized across all Allianz business units as their strategic AI and automation vendor with expected productivity gains of 50% and cost reductions of 40% where AI powered automation is implemented.
Ashish Gupta: Another example of customers expanding to our end to end platform capabilities is a national fund for health insurance in Europe.
Ashish Gupta: He started working with us in 2022 to automate health insurance control processes and now with the support from their CIO will be expanding to the full platform.
Ashish Gupta: We'll first begin by implementing process mining to uncover further automation and support their automation backlog of over 300 processes.
Ashish Gupta: Following this there will be deploying autopilot for testers to support their eye key developers and IDP for health insurance claims there.
The highlighted our orchestration capabilities being a key factor in providing them the ability to scale their automation program in a secure and governed environment.
Ashish Gupta: Turning back to our results revenue grew to $355 million, an increase of 9% year over year.
Ashish Gupta: Remaining performance obligations increased to $1.128 billion up 13% year over year current RP O increased to $718 million up 20% year over year.
Ashish Gupta: Turning to expenses, we delivered third quarter overall gross margin of 85% and software gross margin was 89% for the full fiscal year 2025, we continue to expect gross margin to be approximately 85%.
Ashish Gupta: Third quarter operating expenses were $251 million.
Ashish Gupta: GAAP operating loss of $43 million included $87 million of stock based compensation expense.
Ashish Gupta: non-GAAP operating income was $50 million, resulting in a third quarter non-GAAP operating margin of 14%, which benefited from our previously announced restructuring combined with our continued efforts to drive further operational efficiencies and streamline the business.
Ashish Gupta: non-GAAP net income was $50 million with $60 million, which excludes our nonrecurring noncash tax benefit of $25 million from the release of valuation allowance on certain deferred tax assets.
Ashish Gupta: Third quarter non-GAAP adjusted free cash flow was $33 million, we continue to expect fiscal year 2025, non-GAAP adjusted free cash flow to be approximately $325 million.
As of October 31st we had $1 $6 billion in cash cash equivalents and marketable securities and no debt.
Ashish Gupta: During the quarter, we repurchased 13 8 million shares of our class a common stock at an average price of $11.81 from August one 2024 through October 31 2024.
Since October 31st under a <unk> one plan, we repurchased an additional 0.7 million shares at an average price of $12 57 through December four 2024.
Speaker Change: Before moving to guidance I would like to share an update on a few of my priorities since taking on the additional role of CFO.
Speaker Change: First we have deepened our relationship with our partner ecosystem to help drive further alignment with our customers. While also focusing on enhancing our professional services strategy to better support customer engagement and adoption and we are working to better connect and streamline the organization to improve operational discipline and efficiency while <unk>.
Speaker Change: Retooling certain go to market functions to focus on areas with the strongest return on investment.
For the fourth quarter fiscal 2025, we expect revenue in the range of $422 million to $427 million.
Speaker Change: Or are in the range of $1 $669 billion to $1 67 $4 billion.
Speaker Change: non-GAAP operating income of approximately $100 million.
Speaker Change: And we expect the fourth quarter basic share count to be approximately 551 million shares.
Finally, we will provide guidance for the first quarter and full year fiscal 'twenty six when we report our fourth quarter results, but I would like to highlight that we expect typical enterprise seasonality from the fourth quarter to the first quarter in net new E. R. R.
Speaker Change: Lastly, with our focus on efficiency customer Centricity and product innovation for fiscal 2026, we believe that net new air our dollars will stabilize and our adjusted free cash flow growth rate will accelerate.
Speaker Change: Thank you for joining us today, and we look forward to speaking with many of you during the quarter with that I will now turn the call over to the operator operator, please poll for questions.
Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Speaker Change: As you. Please ask one question and one follow up then return to the queue. Once again Thats star one to be placed in the question queue, if you'd like to remove yourself from the queue. Please press star two and as a reminder, please limit yourselves to one question and one follow up then return to the queue. Our first question is coming from Mark Murphy from JP more.
Speaker Change: Your line is now live.
Mark Murphy: So thank you very much and my congratulations on the successful execution. This quarter I'm you know Daniel I wanted to ask you as we look around and see the agenda models that are being rolled out by Salesforce, Microsoft hub spot in in you know several other companies.
Mark Murphy: Can you comment on whether any of that activity might drive some you a path and usage because I'm just wondering as the third party agents begin to want to take some action and they they want they might want to command and control. Other applications do you think that's gonna be API based.
Mark Murphy: Where they can handle it or do you do you think that there could be some involvement with you did it.
Be like there might be a UI based process in it and it might get.
They may call on you Ipass, then I have a quick follow up.
Mark Murphy: Yeah.
Mark Murphy: Hi, Mark this is a great question.
And I think it goes into our strength as we as we said in the script, we aim to be Switzerland of agents. So that means that we would like to orchestrate our own agents, but also agents built by other companies and also we are.
Mark Murphy: We said agents will be actually as good as the tools that they all will have access to another one oh actually collaborate with other companies building agents to offer them our tools too.
Mark Murphy: Improve the quality of the actions that the agents can take so I think in short we want to we focus on creating this.
Mark Murphy: Agenda orchestration layer that can call our agents other companies' agents, our robots and bring humans in the loop for increased security and governance.
Speaker Change: Okay, I think I understand that it sounds like as they get very broad broad vision.
Speaker Change: I wanted to ask you regime.
Speaker Change: I'm looking at the growth rate of your largest revenue stream, which is the maintenance and support revenue.
Speaker Change: And I noticed it accelerated sequentially and year over year and it seems to be holding on to a mid twenties.
Speaker Change: Type of trajectory.
Speaker Change: Wonder if I could just ask you mechanically.
Speaker Change: What is it that's enabling that that line item is really showing a lot of resiliency and stronger growth actually than the airline.
Speaker Change: And just in case, the answer is a little bit of duration.
Impacting the license line can you could you maybe help us separate out any of that just one just wondering if you can just help us a little bit with some of the mechanics.
Speaker Change: Yeah, the 606 line.
Speaker Change: 606 revenue recognition impacts the license line Mark what you see on the main line is also the benefit of just cumulative net new way our building and the recovery of duration from earlier. This year that does help that as you go through all of our largest customers are growing.
Speaker Change: They're continuing to extend the contracts and that really helps the maintenance and support stream as well.
Speaker Change: Okay.
Speaker Change: That is are you able to comment on how the duration made a change in the in this most recent quarter.
Speaker Change: How much of three conferences earlier in the year each recovered back to somewhat normal from earlier this year, Mark where we talked about some of the execution misses in first quarter, we feel really good about the progress as we changed the incentive compensation plans and refocused the sales team.
Speaker Change: Understood. Thank you very much.
Speaker Change: Thank you. Your next question today is coming from Raimo <unk> from Barclays. Your line is now live.
Raimo <unk>: Perfect. Thank you.
Speaker Change: I actually wanted to get done and I wanted to go back to that agent model like how should we think about that.
Speaker Change: It's going to be the big vendors that have like the domain data like salesforce or workday or in S. E. P M.
Speaker Change: They're going to be very broad based in terms of the orchestration. So do you see yourself like working with those but actually the real kind of push for you guys will be like on kind of more specific domain knowledge, where you're playing already at the moment with insurance companies banks et cetera is that kind of the right way to think about it or I'm just.
Speaker Change: There's a lot of confusion out there. So if you could help us there that would be helpful and I had one follow up regime.
Speaker Change: Yeah, Hi, Raimo I think there I think the right way to think of all with our approach towards that.
Speaker Change: Uh huh.
Speaker Change: Companies like Salesforce for instance, they will build more in application agents. They will build agents that will have intimate access to salesforce and processes that are within the salesforce ecosystem.
Speaker Change: But if you have one if you'll have an agent that has to touch both sales force and epic and this is a real discussion that I was having recently with the CIO of one of our top health care provider in the U S. R. Gardner.
Speaker Change: Big data and you put it into your sales force they say no way.
Speaker Change: So I think our sweet spot is when an agent will have to interact with multiple systems and this is what actually or robotic automation was shiny wait we are known to automate.
Speaker Change: Moderate to complex processes that span multiple systems model and legacy I think our sweet spots for building agents will be similarly for those agents that require data and interactions with multiple system, both modern and legacy.
Speaker Change: Okay perfect. Thank you and it seemed like I get the message on the net U E. R. R.
Speaker Change: And you aren't stabilizing next year on the grocery side like what gives you the confidence for that like maybe just give us or help us a little bit with some handholding here. Thank you.
Speaker Change: So I think when we look at the business, we're really pleased with the progress we've made on the execution front.
Speaker Change: The momentum that we have leading forward on a gentex as we've commented with some of the Fortune 50 customers. In addition to just.
Speaker Change: Company wide Raimo that feels very good we're executing honestly is improving around all aspects from just the rigor that we had with our sales pipeline management.
Speaker Change: And the visibility that we see so we feel confident making that statement just as the business continues to progress.
Speaker Change: Okay perfect. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you next question is coming from Jay reverse from William Blair. Your line is now live.
Speaker Change: Hey, Thanks for taking the questions and it sounds like execution has been improving recently can you just talk about that the go to market changes that you've been able to make them. Thus far and then what do you feel is left.
Speaker Change: With them then they go to market in order to get things back to kind of steady execution that we used to see.
Speaker Change: Yeah, Hi, Jake.
Speaker Change: Look we are pleased with how the improvement that we were driven in the go to market.
Speaker Change: Evolving.
So we said in the in the last two calls we focused a lot into simplification into our go to market model.
Speaker Change: [noise] into eliminating silos, bringing a more functions into the regions closer to the customers we have created.
Speaker Change: Recently, our customer Centricity office that held our top executive being closer to the customer. So look it's we are still in tool we have a lot of things.
Speaker Change: To continue to do but I am pleased of how the things are evolving for now.
Speaker Change: Okay very helpful. And then can you talk about just the feedback that you've gotten from customers coming out of yes boring conference maybe that the pipeline that you are able to generate their and what you're hearing from customers just around the edge and take the use cases that they might be building on that platform gets just given that you had so many.
Speaker Change: Customers and partners there in Florida recently.
Yeah, let me start on the sentiment on light lift go see them come in more on the pipe generation.
Speaker Change: Well, it's a it's been a very transformational for where for US. It's a I think it was the most most consequential for we're seeing slower three when we have announced our plots for hopefully it's there isn't a.
Speaker Change: Extreme interest on our agenda.
Speaker Change: Offering and it's from customers across the world actually prior to forward rebuilding almost six weeks across the world.
Speaker Change: Basically what we are doing when our messaging about agentic with various customers and big banks in Japan, and the Middle East Health care companies in the U S and Europe.
Speaker Change: Frankly, it's a they they listen and they are very interested like we said in the script. It wasn't like you know such a huge health care customers.
Speaker Change: Hearing the pitch they stopped they sit next Monday, we want the stuff that people see with you guys. So and this new messaging I think it's that everything we are rating our discussions with customers. We it's easier to get the attention of the C level executives with these messaging it.
Speaker Change: Yes.
Speaker Change: Seeing a clear way to expand into the use cases that we were capable of ultimate anything so far.
Speaker Change: And then in terms of the pipeline, obviously, we don't really comment in terms of quantification, but qualitatively you know what.
Speaker Change: Daniel has talked about in terms of the interest from the customers that bolsters the pipeline in our minds in terms of just giving us more conviction.
On a lot of the opportunities ahead of us the second piece if you heard it in Daniel script is just a number of registrants are registrations on our private previews and the excitement that's building on the public preview those are all very encouraging for us.
Speaker Change: Great. Thanks for taking my questions and congrats on the steady execution.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Thank you next question is coming from Bryan Bergin from TD Cowen. Your line is now live.
Bryan Bergin: Hi, guys. Thank you a follow up question first on the changes that you do still want to make internally as yes, you were able to return to the doctor and it sounds like you're pleased with the execution, thus far but specifically what else do you have left to do.
Speaker Change: I think the majority of the changes actually Brian like on the streamlining our complete you know where we're really focused now is here to really tell you where it ties our dollars where you have the highest return on investment, especially as we're planning for next year. So we continue to you know our view is to invest within the field invest and the functions that are closest to the.
Speaker Change: <unk> and continue to find efficiencies in the in the functions that are further away from the customer and the spend that is further away that combination for us feels very good. The second piece is just actually on a positive note, enabling the sales team with a gentex and the messaging coming out of for it and there's a lot of energy around it and making sure.
We have a really good sales enablement.
Speaker Change: Function that will drive that messaging and enablement for the sales team is also a priority for us.
Speaker Change: Okay. Okay I appreciate that and then you know you have.
Speaker Change: Government is a notable customer for you across many agencies just given all the talk about it through government efficiency here on just how you're thinking about that market opportunity going forward.
Speaker Change: Yeah.
Speaker Change: Yeah, I think as we said the opportunities in front of us.
We are seeing indefinitely, such a positive energy that we have not seen in the long term in the company, we I am seeing and are in the product and engineering kind of the fastest space of innovation that I.
Speaker Change: I think we've seen from the beginning of the.
Speaker Change: Well you know the.
The inception of our company.
Speaker Change: And Brian on Federal specifically I think they respond very well to the innovation I think we talked about you know assumptions like the IRS et cetera, we see good momentum there I think it uncertainty election cycle, obviously keeps there, but actually efficiency for us as a positive sign right going and driving and making sure. There's more automation there is.
Speaker Change: Higher efficiency, we feel like that is an area that we can continue to partner very well with the government and that so far has been the response that we've gotten from our government customer.
Speaker Change: Okay. Thanks.
Speaker Change: Yeah.
Speaker Change: Thank you next question is coming from Matthew Hedberg from RBC capital markets. Your line is now live.
Speaker Change: Hey, guys. This is Mike Richardson on for Matt. Thanks for taking the question.
Speaker Change: Yeah. It was great to hear about the improved execution, but I was wondering maybe how the demand environment has changed since last quarter and if you've noticed any difference in buying patterns post election.
Speaker Change: And then maybe also like do you guys, usually see a budget flush yearend and with the new agent vision could you kind of tap into those.
Speaker Change: <unk> project dollars are that maybe you weren't seeing before.
Speaker Change:
Speaker Change: I'm not I I would say that the demand.
Speaker Change: Environment is kind of stable and it's it continues to be you know as we've seen in the past two quarters, we have seen no sign of degrading.
Speaker Change: Improvement.
Speaker Change: And then in terms of the budget flush I think we've you know we've.
Speaker Change: <unk> our guidance the way we see the teams are always out executing and working to that you know we don't look for quick ones. We continue to look for long term sustainable.
Speaker Change: Growth from our customers, but of course, our sales team is well equipped to take advantage of any opportunity that would arise for us.
Speaker Change: Thanks, guys.
Thank you next question today is coming from Sanjay Singh from Morgan Stanley. Your line is now live.
Speaker Change: Well. Thank you for taking the questions I've seen thank you so much for providing at least some of that color on fiscal year 'twenty six I'd love to get a better understanding of what you mean by stabilized would you think of stabilizing on sort of a dollars added basis. I think you guys had at around $56 million and that really are this year are you thinking of it that from a lack of a year over year.
Speaker Change: Perspective, just a clarification on that front.
Speaker Change: I think we were very intentional just as we were looking at it how to think about it we've gotten a lot of questions on two basis. One we pointed out the seasonality point as we were looking at the modeling I'm, particularly for a net new air are the second piece, though as you know there's been a lot of questions on the trajectory of the company with the changes that we've made Sunday so we.
Feel very good that if you look at kind of the trend the stabilization as a very positive.
Speaker Change: Signal, reflecting just.
Speaker Change: The improved execution and the changes that Daniel and the team are driving in the business.
Speaker Change: Yeah and to that point on that better execution, it's two quarters in a row now where he's set guide and exceeded those targets.
Speaker Change: Not so much about like necessarily guidance, but with the improved execution, if you've got let's say a better spending environment.
Speaker Change: Or to the extent that you know the commercial market starts to come back online how much of that of how much do you think that would be a tailwind to your ear of growth. Overall, you know Daniel commented on the macroeconomic environment being stable versus the last couple of quarters, and we guide to what's in front of us and so any.
Speaker Change: Positive movements that are out there in the market, we feel like we could take advantage of that but it's a variable environment. So you know it has to unbalance had those tailwind, but I would also say, though I'm Siggi does we are excited about where how we're positioned on the agenda with as well and I think in addition to the market.
Speaker Change: Our product innovation and our execution also allows us to have confidence as we move into the following years here.
Speaker Change: Understood very clear thank you.
Speaker Change: Thank you next question is coming from Terry Tillman from Jewish Securities. Your line is now live.
Speaker Change: Yeah. Good afternoon, everyone. Thanks for taking my questions. It's it's one question in three parts.
Speaker Change: So <unk> is not a common thing for ISP, you sort of capture that just suggest the up you know the closeness you have with the company and the opportunity, but I'm curious about so first in terms of you know the timing on how this could kind of go through their their ecosystem because earlier I heard I think you seem to be talking about sales enablement. This is gonna be sales enablement around that so I know you've been working.
Speaker Change: With them, but still lags in terms of making its way through that very bass distribution channel.
Speaker Change: Second question I wanted to ask is with test suite.
Speaker Change: This is a multi year kind of Esperanto upgrade cycle, how impactful is that starting to be unpredictable each quarter and then the third thing I can repeat all these with Lida you don't write them down.
Speaker Change: So like the deals I assume though it's a little bit different on Rev. Rec as opposed to if it was just on your paper. So anything you can share about how those deals with luck. Thank you.
Speaker Change: Let me take the first one then I love what seemed to come in front of us.
Speaker Change: Yeah.
Speaker Change: We are excited about the salt lakes deal. It's a it's taking a lot of time to to put it in place a lot of product. Therefore, we are we are now really an integral part of the ACP solution and our outreach, it's much bigger than that.
Our credibility with enterprise customers, it's it's even more increasing.
Speaker Change: Any partnership this is it.
Speaker Change: The <unk>.
Or the earnings, but we are seeing improvements in the pipe creation. We mentioned some of the deals that were influenced by this but we have it's it's just really a new partnership, but I am quite bullish over.
Speaker Change: The years of what it can happen in terms of the test suite.
Speaker Change: Not only for.
Speaker Change: It's a P migration, but.
Speaker Change: For other large business obligation plus one we would have seen the tremendous momentum.
Speaker Change: Right.
Speaker Change: And we are I think one of the thoughtfully book into a gentex testing and bringing the really more ginnie I into testing eventually really.
Speaker Change: Really going as far as to be capable of automating, even exploratory testing, which can be a huge step into automating manual testing. So it's.
Speaker Change: Great.
Speaker Change: I'm seeing really good momentum overall on the on the testing side and I think just to put one point on the enablement, we've been working with S&P now for a while because the partnership has started and it continued to deepen so I think the sales enablement piece, we feel very good about just the you know that we've had experience.
Speaker Change: On it in terms of revenue recognition and it really is going to follow our normal 606 accounting practices. There's nothing unique about it is the portion of the software that we sell through so that's well will go through our normal AOR accounting and normal revenue recognition policies under 606.
Speaker Change: Thank you.
Speaker Change: Thank you next question today is coming from Kirk return from Evercore ISI. Your line is now live.
Speaker Change: Hey, Thank you this is gerard on for Kirk.
Speaker Change: So when you're thinking through your customer renewals and expansion over the last couple of quarters and looking ahead to next quarter are there any recurring themes or products that you would highlight I think greater traction and contributing to a greater part of a net new era recently that might be different from before.
Speaker Change: I wouldn't say, it's very different before but I would say what we see each year. AGA has continued a continued adoption of our growth products like I D. P of our AI products like I D. P. M autopilot et cetera, you know the largest deal in the quarter had a gentex flavors to it.
Had autopilot for everyone is a piece of it so you really see expansions happening where our overall platform is positioned well and that continues to be a priority for the company. The second piece Daniel talked about testing. We are seeing continued momentum on the attractiveness of our test automation platform and factors into our expansion.
Speaker Change: Got it and.
Speaker Change: One more on the on the financials, but you delivered a strong margin beat this past quarter, you called out the restructuring, but you know what.
What drove the beat and do you believe these same factors that helped drive upside in Q4, given that Q4 has historically been your strongest margin quarter.
Speaker Change: Look Q4 like my guide for Q4, as our guide we factored everything in wood I, we feel very good about is the execution and the discipline that the teams are putting around you know driving efficiency and eat and the pace at which we're able to streamline the company and those results showed in third quarter end.
Speaker Change: As we talked about for next year. We also talked about re re accelerating our free cash flow growth rate. So all in all we feel very good about the trajectory and profitability for the company.
Speaker Change: Alright, thank you so much.
Speaker Change: Thank you next question today is coming from Kingsley Crane from Canaccord Genuity. Your line is now live.
Speaker Change: Hey, Thanks, so within your cloud business could you provide a directional comment on the mix of hybrid cloud into yourself.
Speaker Change: We don't provide that on a you know on a on a on a routine basis in terms of this we will follow our normal cloud disclosures that we do and you know that usually is on every every other quarter that we discussed that that being said we have been very forthright that the majority of our installations are on a hybrid basis, meaning they use some law.
Speaker Change: Level of on Prem and some level up on the cloud what's encouraging is our cloud is becoming more and more adopted and and attractive to our customers as it matures and his capabilities are launched in a cloud first way.
Speaker Change: Great and so just as a quick follow up.
I guess like how are you thinking about your customers ability to leverage some of these newer capabilities like it didn't take a I, depending if they are deployed pure size hybrid or on premise.
Speaker Change: Thanks.
Speaker Change: I think that's actually our hybrid offering it's it's gonna contributes to our differentiator.
Speaker Change: Third we are a differentiator because many of the customers will still have a on prem systems and they are it's going to be very helpful to have our robots deployed on the on Prem systems and provide access to those systems to agents and you know what they like to.
Speaker Change: The risk here is that.
Speaker Change: Robots can provide the very secure and precise way to access data you can give access to an agent exactly to the data they need in order to.
Speaker Change: To make an informed decision and this cannot be achieved really in any other way.
Thanks, that's really helpful. I appreciate it.
Speaker Change: Thank you next question is coming from Brian Schwartz from Oppenheimer. Your line is now live.
Brian Schwartz: Hi, Thanks for taking my question Daniel I know, it's real early in terms of our the Asp's that you're getting for these are John take automation deals and maybe it's even hard to parse out but is it possible to compare the asps on these type of deals versus the other products in the suite in and I got a I know, it's early but I'm trying to see if they scared.
Brian Schwartz: When they scale, if they could end up being larger deals done.
Brian Schwartz: The core products in the suite.
Speaker Change: Yes, I think that they can drive really loved your deals like the one that we mentioned in the script I would love just deals. This quarter was an <unk> deal that leave us or our auto pilots for everyone and that's it.
Speaker Change: If it's open up.
Speaker Change: Even no different pricing models you can we've the Genting you can't even price the use case basically and it can get closer to the value that we can unlock for customers. So I'm really positive that are.
Speaker Change: The ASB can be increased by driven by agents.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you we've reached end of our question and answer session I will turn the floor back over for any further or closing comments.
Speaker Change: Yeah. Thank you. So much guys. We are here for thinking further questions in the coming days and weeks.
Speaker Change: Yeah.
Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Speaker Change: Yeah.