UiPath, Inc.

Hello, and thank you for your patience. I will now hand the call over to Daniel.

Hello, everyone. Thank you for coming back after our outage with the service provider for our investor relations conference calls. We are ready to take questions. I hope that you guys get the chance to listen to the end of our reading. And also we have published online the entire transcript of our earnings calls. So thank you again and apologize for the delay. We are ready to take questions.

Thank you. And with that, we will now be conducting a 30-minute question and answer session. We do ask that you please limit yourselves to one question and one follow-up. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question comes from the line of Brian Bergen with TD Calendar. Please proceed with your question.

Hi, guys. Thanks for taking the questions here. First one I have is just as it relates to net new ARR. And as you built the 2027 outlook, just how are you thinking about net new ARR expansion potential here on an FX neutral basis? Sorry if I missed what you said on FX contribution assumptions as it relates to 1Q. and the full year, but just trying to unpack that looking ahead. And then my follow-up is going to be on margin. So, an up-income margin, appreciate the update on the 30% target. Just want to dig in on how you're thinking about the potential kind of, you know, the moving parts of that as it relates to gross margin and OPEX components moving forward.

Yeah. So, Brian, great to hear from you. When you think about the IAR contribution, I think our guidance kind of says it. There's really no significant or material FX contribution from that versus our prior guidance. So as you look at it, you know, really FX is a minimal impact from where, you know, our previous estimates were. The second piece of it is from a margin standpoint, you know, you look at the moving pieces and definitely, you know, across the board there is opportunity to agentify and to use the technology advances. you know, across every function. That includes, you know, engineering, G&A, as well as sales and marketing, which gives us really the ability to continue to reinvest in growth as needed. But, you know, we're going to look at a balanced way in terms of what makes sense for the company. And you can see our commitment to operating margin expansion over the last two years. And then just back to the IAR, I want to just give a little bit of color to When you look at our base, we have a sizable Japan business. So we have headwind from the yen and tailwind to the euro. And they basically net out to be an immaterial impact for the full year. So we're really pleased with the progress. As Daniel commented and I did in the script, we really feel positive about the expansion that we're seeing within our customers. And, you know, our ability to stabilize our net new ARR, and that's kind of reflected in both our performance as well as our guidance.

All right. Thank you.

Thank you. And our next question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed with your question.

Yeah, thank you for squeezing in. Daniel, thank you for that disclosure on the ARR traction, I'm sorry, the AI traction with respect to ARR of the $200 million. That was great to see. In terms of the composition of that, could you give us any details on sort of you know, the split between IDP and what you're seeing on the agent side. But to be certain, you can sort of disclose that. I'd just love to hear about the underlying momentum with the agentic side of the house, including Maestro, as you go into next year.

Hey, Sandeep. We have really a great momentum on, you know, diffusion of the AI within our platform. We have not provided, you know, clear ratios between different components of what we put into the AI. And I will let Ashim to comment further.

Yeah, so when you look at the way we price, we actually allow pretty good fungibility between our AI and agentic products, actually, both in some of our old pricing as well as our new pricing. So we don't really materially split it out. Of course, IDP has been in the market for a longer period of time, for the last two and a half to three years. So IDP definitely has a good portion of the IRR. But agentic is a significant portion. And we see that in the platform. You can see that in the deals and the commentary that we're giving and selling as a part that we talk about in our script. So from that standpoint, we can't really split it apart, but we also see them as complementary because, remember, IDP also includes IXP, which is not like simple document processing. It really uses advanced technology to be able to parse different documents using different models, and that is part and parcel of the way we price.

Yeah, that's great. That's great context. And then just a follow-up on the guide, Ashim, on two aspects. One, in terms of work fusion, how should I think about that contribution when I sort of calculate what the guidance implies from a net UAR basis? I think there's some reports out there that there are around 25 million AR towards the end of last year, so I just want to sort of sanity check that. And then from, you know, this time last year, there was some concerns around DOGE, as you guys were pretty cautious on the federal business. Just your sort of underlying assumptions about Fed going into next year, maybe the first half of this year, given some of the headwinds you saw this time last year.

Yeah, so the first thing is the $25 million is not accurate. That's the first thing I can say categorically. The second piece is, you know, they also had a different method of accounting. So when we brought it back, you know, even the numbers that have been out there also do not account for it. It is actually below our materiality threshold. So that gives you an indication. We really look at this like a tuck-in acquisition in terms of where it is. And, you know, from that standpoint, you can also just see kind of the strength overall within our guidance, and we've been transparent that that includes, you know, the work fusion contribution. But it is immaterial, and we don't break it up.

And then just on the Fed piece.

Yeah, sorry. On the federal government, we're actually seeing really good traction there. You know, I would say just like the environment, I would say the federal government is a dynamic economy. But I would say our team has done an incredible job connected at really high levels within the organization. And, you know, I'll let Daniel comment on some of his discussions and his views of it. But, you know, within certain agencies, we feel very well strong position. And then there are some agencies, of course, that are going through their changes. But overall, we're actually very bullish about the way our teams are executing, and the opportunity that exists there.

Yeah, and we are seeing an increased appetite for more long-term projects, strategic projects, especially in the Department of War.

I appreciate that. Thanks, Daniel and Ajit.

Thank you. And our next question comes from the line of Michael Turn with Wells Fargo Securities. Please proceed with your question.

Hey, great. Thanks very much. I appreciate you taking the question. Just to start maybe a higher level one, you had some commentary, but just in terms of budgets and what you're seeing around categories like automation and AI, it'd be great to get just a top-down view there and also how you're position to capture that in the market where there's just an increasing number of vendors also positioning agentic solutions which may be newer to market but might also insert some noise into those conversations?

I think we are really way positioned to help customers with the diffusions of AI within their enterprise workflows. We have we built Maestro, which is essentially a process orchestration technology. At its core, it's a new, powerful workflow engine. That gives us a very interesting advantage in the market right now. We all know about the impact of the coding agents. I would say that this will translate for us. I'm extremely bullish about it. into a much faster adoption curve for our customers. We aim to use coding agents to enable our platform for coding agents that will accelerate dramatically the time to value for our customers. And that, of course, includes creation of AI agents, deployment of agents in the context of enterprise workflows. I would like also to to stress how important is the combination between deterministic automation and agentic automation into the context of the same platform that can orchestrate both, what I would say, humans, agentic, and deterministic automation.

Thanks for the color there, Daniel. Asim, you gave some texture. I know the commentary and the guidance on the call was pretty similar to entering fiscal 27 as 26, but it sounded like in some of the prior answers that maybe public sector is trending a bit better. So just any more context you'd give us around how you're characterizing the current environment, the visibility you have into the model for the forward year at this point, and just how you're thinking about the contribution from the AI product portfolio as that scales in fiscal 27.

Yeah, I mean, we really continue to characterize it as variable. And I'll double-click just again for, you know, anybody who's new in terms of what we mean by that. I think we do see pockets of strength and we see pockets of pressure or fluctuations that happen from a macroeconomic standpoint. And at the same time, those tend to move around quite a bit. Like right now, our bullishness in terms of public sector feels really good. Last time of this year, if you remember, we kind of all, you know, felt a lot of uncertainty in that area. We're seeing strengths in areas like, you know, financial services and healthcare, international markets like Australia. And then there's, you know, obviously the Middle East conflict is there, so there's uncertainty there. So we really characterize it as variable. As I commented in the script, you know, we continue to kind of maintain a very consistent guidance philosophy. You know, we look at our pipeline. We have really deep inspection. We get a lot of signal from the field. has spent a lot of time with customers over the last three months, four months. We've been very in touch with kind of the field in terms of what we're hearing. And then the other piece is we obviously have very strong now statistical and forecasting models between our finance and our ops team, and we triangulate the three of them. So, you know, we talked about kind of putting the appropriate prudence in for guidance, accounting for the variability of macroeconomic environment, and we've done so. And at the same time, when you look at our guidance, I do think it also reflects kind of stabilization of net new ARR and what the potential is yielding in terms of the traction our teams are making in the agentic market and how we're positioned. So that's how I would characterize our guys.

All very helpful. Thanks very much.

Thank you. And our next question comes from the line of Kirk Merturn with Evercore ISI. Please proceed with your question.

Hey, this is Chirag on for Kirk. Thanks so much for taking the question. You highlighted multiple industry partnerships, right? Viva, like with Viva and certain vertical solutions like healthcare and financial crime. Would you highlight healthcare and finance as the two verticals that are showing the strongest willingness to spend right now on agentic AI initiatives or are there others that you would flag? And when you think about agentic automation at scale, what does success look like in terms of repeatable playbook and sales cycle impact here? Thank you.

I think you got it very right. It's the healthcare. And I think we nominated within the healthcare in particularly, I would say, parts of revenue cycle management, denial, prior authorization. It's a very important type of processes for us. Financial industry has been, you know, since the beginning of the company, our stronghold, and we strengthen it with the acquisition of WorldFusion, with our big foray into financial crimes. And I would add also the public sector as an important vertical for us that we are eyeing.

Okay, thank you.

Thank you. And our next question comes from the line of Terry Tillman with Truist Securities. Please proceed with your question.

Yeah, thanks for taking my questions. I have two. So first on Maestro, it is my impression it's vendor agnostic from an agendic standpoint. Are you all seeing situations where it's involved in managing agents from system record companies or AI native businesses? Or is it mostly like a control plane for your own agents and then add a follow-up?

Yeah, I think Maestro, it's kind of agnostic in terms of what kind of agents it can manage. Of course, for our own agents that are built with Agent Builder, we have very tight integrations. But we have also brought agents built with open source frameworks like Maestro. The LandGraph type of agents is first-class citizens in our platforms. And in terms of using, utilizing agents built on system of records applications, of course, we facilitate using them in our platform. I would not say we manage them. It's more or less like you can call an API. that is provided by that platform. But I want to be specific. All agents that are built with open source framework can be deployed and executed in the context of security and governance that our platform provides.

Yeah, that's a good clarification on the API side. Thank you, Daniel. And I guess, Ashim, The SAS shift, that was an important call out, 1% impact to growth as we look into FY27. I'm also curious, though, is there also starting to be this impact of timing dynamic or around consumption or scaling volumes related to the actual logistic solution that we need to kind of appreciate that's not going to show up in revenue yet?

No. I mean, remember, we still price on kind of a bundled, meaning on a subscription consumable type hybrid model, meaning We sell kind of use it or lose it units that are there. So we're not on a consumption basis of accounting, so to speak. We're still on an ARR basis of our accounting. So I would say it's not about any trailing impact or any delayed impact that you would see there. At the same time, I think our agentic solutions are scaling and our customers are adopting more and more as we talked about in the script and sales are moving. very well for us. And, you know, that obviously is what's contributing a little bit to our SaaS headwind.

Yep, thank you.

Thank you. And our next question comes from the line of Odi Sultan with UBS. Please proceed with your question.

Awesome. Thanks, guys. Daniel, in your prepared remarks, you mentioned this growing backlog of automations you're seeing at customers. I just wanted to double-click on that. Like, how big is that tailwind of AI unlocking more automatable workflows? And you mentioned the AI product, ARR, but just how material is that sort of pulled through to the core automation business as well? I'd just love to get your thoughts there.

Yeah, that's an acute observation because, you know, the huge interest in AI – it's actually driving a renewed interest in automation. I think in most cases that we are seeing, people expect that the use of AI will result in some sort of automation. It's becoming more clear that AI and agentic AI and deterministic automation are very complementary. So basically, any AI initiatives surfaces more opportunities for deterministic automation, especially in our case for unattended deterministic automations. Got it. Thanks.

And just to follow up for Ashim, just as we think about the ARR and revenue guide for the year and we think about sort of what the biggest drivers are, you guys really expanded the product portfolio over the past, you know, 12 to 18 months. And just as we think about, you know, AI product, test cloud, vertical solutions, sort of core RPA, like how should we think about sort of what the biggest drivers are on that sort of growth next year as you kind of think about the guide?

Yeah, I think if you just look at some of the metrics that we disclosed, right, 90% of our million-dollar-plus customers are have an incorporated AI products, right? I think that is a great, to me, kind of a great tell of the success of the AI products and the ability for us to expand. And we've also talked about the number of customers that still, you know, have room to adopt those AI products that are there. So from our standpoint, AI and agentic is going to lead the way. But at the same time, as Daniel talks about, you know, they're not a separate stream. They actually are very synergistic. As people... you know, pull forward AI and agentic products from us, it actually also pulls through the rest of the platform, whether that is IDP, IXP, unattended robots, et cetera. And we see that. You know, we were very purposeful in discussing, you know, that we are seeing growth, growth rate within kind of the core RPA business. And we look at that as very synergistic as we go forward. The other thing to highlight is we're super excited about our test automation business. And, you know, that is still in its infancy, but we really see that having good traction in the market, and that can also be – that is also a growth driver for us as we enter this year.

Awesome. Thanks, guys. Thank you. And our next question comes from the line of Scott Berg with Needham & Company. Please receive the question.

Hi, everyone. Thanks for taking my questions here. I'll get to Daniel. We've been doing some work with some partners here. It's become very evident and clear that your partner strategy seems to be resonating really well right now across several different – or your vertical strategy, excuse me, is working well across several verticals. But my question is, as you look into 27th, Are you able to lean into that strategy even more so given the success you're having there lately, or do you feel like you're already at kind of a maximum effort?

On the contrary, I think we are at the beginning of our vertical strategy. We are doubling down our focus on investments into this year. So if I can summarize our product strategy, I think there are three major pillars that we are seeing right now. So we focus on adopting coding agents all across our platform. So every single artifact that is building on our platform will be built primarily by coding agents. Second is process orchestration that really drives everything, agentic AI and deterministic workflows. And third is vertical solutions. And we are seeing clearly more of a move into customers that have a higher demand of kind of an outcome-based, vision-based, use case-based type of solutions that they want to adopt.

That's very helpful there. And then, Ashim, something you can drill down in the quarter a little bit. I know there's a $14 million sale wind around FX for ARR. But what was your assumption of that number going into the quarter? Getting a lot of questions to try to kind of back into the math in terms of how much incremental impact there might have been versus your expectations 90 days ago.

Yeah, it was honestly right. It was just right in line with that. As I talked about, I think the yen you can see has inverse correlation to the euro, and the net for both of those tended to be zero. We see that both as we look into the current year, as we've seen FX rates move, as well as the current assumption that we see there. So from both our guidance standpoint and our results, we really see an immaterial impact to that. The driver for our beat in the quarter was really just sales execution. And, you know, we feel very strong about the customer response, as we've seen, about the traction that we're getting within our AI products. FX did not have a material impact versus our guidance.

Oh, thank you. Thank you. And our next question comes from Kingsley Crane with Canaccord Genuinity. Please proceed with your question.

Thanks for taking the questions. And I think the idea of AI on top of deterministic automations is really resonating. Just on this idea of agentic really being about pulling through to the whole platform, just trying to get a sense of how that ends up playing out from a deal timing perspective, like, Is the customer typically renewing at a much higher rate? Is it happening where they'll adopt AI and then through the lifecycle of their contract, they'll realize that they need more automation? Just trying to get more color on that.

Thank you. I think it's all of the above. Honestly, like we've seen customers renew just at renewal, expand into AI products. We have very good examples of that, both within, you know, across every vertical and every geography. There's also areas that, you know, they're still working through their POCs, but it's bolstered their renewal. and their confidence given our roadmap. And the POCs are moving well, so they would expand just a little bit as they continue to kind of dip their toe in the water. So from our standpoint, it's not one single motion. You know, it really depends on the customer or the circumstance. But what is encouraging to us is the success that our proof of concepts, the feedback that we're getting from customers, that, you know, as Daniel talked about, governance matters, and the full extent of our platform is a difference maker for us.

Great. And then just a quick follow-up. That number one OS full ranking for ScreenAgent, definitely impressive, and that's still holding up. Just curious, like, how specifically ScreenAgent is driving more automation growth within customers? And just a reminder on the unit economics, if that's affected by, you know, running Opus versus running Haiku, things like that.

Thanks. Yeah. I think we are still in the early innings of deployment of the screenplay agent. We are seeing really good use cases from our customers. The powerful use of this screenplay agent is that it is used in the context of autonomous workflows. So basically the best we combine like using deterministic UI automation technologies and in the places where it's difficult to define in rules how to use the screen when the screens are have you know high degree of variability our customers are using the screenplay agent so that basically extended our platform in a few use cases that we couldn't basically touch before but again I think it's still a early to comment on how does it help with the platform adoption.

Thank you. And our next question comes from the line of our Senga mental pitch with wolf research. Please proceed with your question.

Thanks for taking the question. I just kind of wanted to go back and expand kind of on the ARR guidance, the methodology in terms of that conservatism. Like, what does that mean? And I understand we're not going to be talking about inorganic from work fusion, 20 million, whatever it is. Even if you strip out that number growing at the 65% rate the CEO talked about, is there a way that it still looks a little bit less conservative in that guide? And if there is a little bit less conservative – any dynamic where it's just, hey, larger renewal cohorts and also more confident in that execution tailwind that you started to see at the end of the year?

Yeah, so one is I just want to correct, like, I don't think we should, you know, the metrics that we talked about, as I said, we bring it on at a different ARR methodology, so I really want to caution everybody to use kind of those false, those assumptions. It's immaterial for a reason as we've done that test. The second piece is, you know, while the While the business is growing at 65%, remember, we also have overlapping customers, et cetera. We really view this as a technology tuck-in that can drive utilization and stickiness across our agentic and AI platform. And, of course, we do see potential there for the upsell, but we also have to go through an integration period with the company. And that is all baked into our guidance from that standpoint. You know, we look at it as our core business continues to be very strong, and we are stabilizing, you know, net new ARR. And, you know, with AI Energetic, we do feel bullishness, you know, about the overall business. But given the macroeconomic environment continuing to be variable, you know, we do layer the appropriate prudence that is there.

Got it. And then just in response to an earlier question, I didn't really kind of get the in line with the constant currency. Can we just clarify what was the constant currency ARR growth implied in the guide for revenue and for ARR growth? Because the communication throughout the year on tailwinds and incremental headwinds has kind of laid up a weird kind of analysis to figure out what the actual core constant currency growth was.

Yeah, you know, from our standpoint, we gave the $14 million, which we assumed for the guidance that was there, but the growth rate remains 11%. For us, it is largely immaterial year over year.

Thank you. And our next question comes from the line of Siti Panigrahi with Mizuho Securities. Please proceed with your question.

Hi. This is Phil on for Siti. So you guys raised the long-term non-GAAP operating margin target to 30%, which is a meaningful step up. Can you walk us through what gives you confidence in that number? And what is the timeframe of achieving that target?

Yeah, so, you know, right now we're in and around 23% north of that. We've shown really good progress in scalability over the last couple years in particular. The first thing is we just continue to operate with really good discipline, and so we constantly are moving investments to higher return areas. And so when you're able to do that, it obviously creates a scalability of expansion. The second is, you know, we believe in the productivity that is being unlocked right now with Agentsic. And that agentification within our own business is something that is very exciting for us and our teams to unlock further steps of productivity. And that includes all areas within the company. We can be more productive, expand, and support our broader roadmap really with similar technology spend just because of the advances that are there or R&D spend. The same goes with our G&A function as well as our sales and marketing function. So we're really seeing that scalability just even with the technology advances as well. In terms of timeframe, you know, it's a long-term margin target. You know, as it implies, that's kind of within a three-year timeframe from our standpoint in and around it. And at the same time, like, you know, we're not waiting for three years. We're going to continue to execute and, you know, drive productivity as we see fit.

Thank you. And our next question comes from the line of Koji Aikido with Bank of America. Please choose your question.

Yeah. Hey, guys. Thanks so much for taking the question. I'm going to ask one on dollar-based net revenue retention. So it's down a point to 106% when adjusting for FX. And so looking into fiscal 27, what are the main drivers we should be thinking about, whether that's product, geography, vertical, or or maybe something else in there that can drive expansion in that metric. And how should we be thinking about the dollar-based net revenue retention assumptions that are embedded in the guide? Is that flat, up, or down from the 106%? Thanks so much.

Yeah, I think when you look at overall net new ARR stabilizing, like, we don't really see a difference in the mix shift between net new logos as well as expansion. We see them both as areas that will continue. We've kind of operated in this 80-20-70-30 split. So, you know, that gives you, I think, enough data to be able to see that net new ARR stabilizes over this period of time from where we are. In terms of what gives us confidence or kind of how we see that expansion, again, as we spoke about earlier, it is really around our AI and agentic products. And then with that, really pulling through the overall platform, you know, including deterministic automation, you know, continuing to expand across our customer base.

Thank you.

Thank you. And our next question comes from the line of James Kissimer with Water Tower Research. Please proceed with your question.

Hi. Thanks for taking my question. I guess first, just from the foundational model perspective, I mean, has the entropic, you know, supply chain risk designation, Have you seen any kind of ripples from that at all? Is there any kind of exposure at all, any change in behaviors out there? And then just on the work fusion acquisition, does that pertain potentially, you know, future acquisitions and other verticals for agenda capabilities? Thanks.

Yeah, in relation to anthropic, our strategy was from the beginning to be model agnostic. And we, one of the features that many of our customers have requested is to give them the capabilities of choosing what model and even bring their own model to be used by our platform. So we do offer anthropic models, but they are optional and not mandatory. And from this perspective, there is zero impact on our working relationship with public agencies. in the U.S. About work fusion, yeah, we are always looking into the market, especially for talking acquisition that gives us the talent, technology, and expertise in a particular vertical. Thank you.

Thank you. And with that, ladies and gentlemen, that does conclude the question and answer session. I would now like to turn the floor back to management for any closing remarks.

Well, thank you so much for listening to this call. And once again, I would like to apologize for the outage that we experienced. And I'm looking forward to meeting many of you in the coming days. Thank you.

Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may now disconnect at this time and have a wonderful rest of your day.