UiPath, Inc.

Hello, and welcome to the UiPath's second quarter 2025 earnings conference call and webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad, and we ask that you please limit yourselves to one question, one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Elise Ferlani, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today to review UiPath's second quarter fiscal 2025 financial results, which we announced in our earnings press release issued after the market closed today. On the call with me are Daniel Dines, UiPath's Chief Executive Officer, and Ashim Gupta, Chief Financial Officer, to deliver our prepared comments and answer questions. Our earnings press release and financial supplemental materials are posted on the UiPath investor relations website, ir.uipath.com. These materials include gap to non-gap reconciliations, which we'll be discussing on today's call. This afternoon's call includes forward-looking statements about our ability to drive growth and operational efficiency and grow our platform, as well as financial guidance for the third quarter and full fiscal year 2025. 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. 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, 2024, and our subsequent reports filed with the SEC, including our quarterly report on Form 10-Q for the period ended July 31st, 2024 to be filed with the SEC. Forward-looking statements made on this call reflect our views as of today, and we undertake no obligation to update them. I would like to highlight that this webcast is being accompanied by slides, which this quarter includes an embedded AI demonstration video. We encourage everyone to join our webcast in order to view the demo. We will post the slides and a copy of our prepared comments to our investor relations website immediately following the conclusion of this call. In addition, please note that all comparisons are year-over-year unless otherwise indicated. Now I'd like to hand the call over to Daniel.

Thank you, Alice. Good afternoon, everyone. Thanks for joining us. I want to take a moment to thank our team for their improved execution and everything they do to make UiPath successful. We are pleased with our second quarter results, which exceeded the high end of our guidance across all key financial metrics, a testament to our improved execution and the compelling value that our AI-powered automation platform delivers to our customers. We ended the quarter with ARR of $1,551,000,000,000, an increase of 19% driven by net new ARR of $43,000,000. Second quarter revenue was $316 million, and we deliver non-gap adjusted free cash flow of $49 million. I'm excited and energized about my first quarterback in the CEO role. I spent much of my time during the last few months traveling to visit customers, partners, prospects, and employees. Customers globally continue to ask for our help leveraging the power of AI and automation to transform their businesses, and it's becoming more clear to customers that AI is about automation. To quote the CIO of one of our largest customers, we went through a series of workshops internally to develop our AI strategy, and the outcome was more automation. Building an AI-powered automation strategy isn't just about technology. It's about aligning our capabilities with core business challenges to enhance customer experiences and optimize operational efficiency. And we continue to strengthen our position as the platform of choice for capturing the opportunities that AI brings to an enterprise. On our first quarter earnings call, We discussed our commitment to improving execution and streamlining the organization, driving a deeper strategy around our growth products, continuing to enhance our relationships with meaningful partners, and becoming a more customer-centric organization. I am encouraged with the progress we are making, and I would like to take a few minutes to talk to each of these initiatives in more detail. First, as I have gone deeper into the operational side of the business, I am committed to continuing to sharpen our focus on operational rigor while learning into areas where the return on investment is the strongest. As the leader in enterprise automation, we have and we will continue to invest in innovation to support our growth initiatives and best serve our customers. With that in mind, Our go-forward priority will be balancing these investments while expanding non-GAAP operating margins and delivering sustainable non-GAAP adjusted free cash flow. During the quarter, we made the difficult decision to reduce our workforce, streamlining the organization and driving further operational efficiencies. while better prioritizing our go-to-market investments and continued focus on innovation. With these strategic actions, we now expect non-GAAP operating income of $170 million for full fiscal 2025. Second, we are focused on driving a deeper strategy around our growth product. And we've begun the process of identifying and prioritizing high potential solutions and use cases and ensuring all of our teams from sales to partners to services and products are focused on a common set of priorities that have larger scalable impacts for our customers. While these changes are in the early stages and will take time to build, These enhancements are already having a positive impact, and I'm particularly excited about the successes we've seen with our IDP solutions. For example, a Central American financial institution began their automation journey by automating back office processes across treasury, management, payments, and customer service. enabling them to reduce their banking transaction clarifications from eight days to one and migrate over 50% of their physical banking transactions to their online channel. After seeing the substantial benefits from our automation capabilities, they implemented document understanding to digitally onboard over 500,000 clients per year. and are now piloting IDP for unstructured documents by leveraging our generative classification, extraction, and validation capabilities. Additionally, they will be implementing communication mining in Salesforce to better understand customer issues and reduce clarifications. Our test suite capabilities are also resonating, enabling customers to accelerate time to value while maintaining the stability and reliability of processes and applications in production. During the quarter, we closed our largest test suite deal ever with one of the world's largest technology companies. With the help of UiPath team, they will be implementing our solution to automate testing for their CPQ process in Salesforce and several other processes including ordering, billing allocation, incentive compensation, and forecasting, with an expected cost saving of approximately $23 million a year. Third, partners are a cornerstone of our go-to-market strategy, enabling us to scale our market reach and elevating our customer success initiatives. And I'm excited about our continued growth progress with SAP, including an expansion deal with an Australian multinational corporation and customers since 2021, who originally used UiPath test suite to support their SAP S4 HANA migration. After successfully completing their migration, they expanded in the quarter and are working with UiPath team to establish an automation program globally, encompassing core automation, testing, and AI. Our SAP partnership is also helping us secure new logos, like Gold Peak Technology Group, who will be automating their order input processes to extract and input data into SAP, eliminating manual inputs and avoiding human errors. During the quarter, we also expanded our relationship with Deloitte. integrating our capabilities into Deloitte's Ascend platform to transform SAP project delivery and help companies accelerate and refine the execution of business transformation. For this program, automations are available across various project phases and SAP functional areas, facilitating an effective and efficient deployment process. fostering an automation-first project delivery, and driving faster value for Deloitte's global customers. And finally, our success is deeply rooted in our ability to serve our customers, making a customer-centric mindset more crucial than ever. We understand the importance of successful implementation, and the entire company is focused on ensuring our customers achieve it. This includes taking steps to improve alignment and communication between our teams and our customers through deeper account-level reviews, ensuring the appropriate connections happen across all customer stakeholders. Turning to product highlights from the quarter, in our July release, we launched a series of product innovations that deeply infused GenAI into our automation platform. This included new specialized LLMs for IDP, GenAI activities, and the launch of Autopilot for developers and testers. Since launching Autopilot, we've seen great early adoption of positive feedback from customers. A great example is a multinational digital communications company, an early adopter of Autopilot for testers. The company's generative AI testing roadmap centers on leveraging our LLM capabilities throughout the entire testing lifecycle, from creating user stories to generating test cases and to reporting. With the power of Autopilot, they believe they will be able to consolidate the tools used in their testing framework and reduce manual testing by up to 50%. And we are excited for the next phase of Autopilot, Autopilot for Everyone, which we expect to launch into general availability this fall. Over the past few months, We've been working closely with a few customers in private preview, and we consistently hear that Autopilot for Everyone is not only giving better responses than other LLM-based chat solutions, but is also more valuable because it provides the ability to immediately automate an action. To give you an idea of how Autopilot for Everyone is different from other Gen-AI chat solutions, We'd like to share a quick demo of a real Autopilot use case that we have been working to develop with the US-based biotech company. If you are not on the webcast, please go to our investor relations website for the demo link.