Hello, and welcome to the UiPath Second Quarter 2025 Earnings Conference Call and Webcast. At this time all participants are in listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Allise Furlani, 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 GAAP to non-GAAP reconciliations, which we will 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, in our subsequent reports filed with the SEC, including our quarterly report on Form 10-Q for the period ended July 31, 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, Allise. 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 billion. an increase of 19%, driven by net new era of $43 million. Second quarter revenue was $360 million, and we delivered non-GAAP adjusted free cash flow of $49 million. I'm excited and energized about my first quarter back 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 is 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…

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. Turning to the second quarter, ARR totaled $1.551 billion, an increase of 19%, driven by net new ARR of $43 million. Our cloud-first approach is driving adoption across our customer base and we ended the quarter with more than $850 million in cloud ARR, which includes both hybrid and SaaS, an increase of more than 65%. A great example is Ontario Power Generation, a customer since 2018, who expanded in the quarter as they begin to migrate to the cloud. They are also planning to expand to additional departments across the organization, while incorporating document understanding and communications mining into their program. We ended the quarter with approximately 10,810 customers, including new logos like IXM, Veness, Masson Associates and Piedmont Healthcare. Moving on to customer metrics. Customers with $100,000 or more in ARR increased to 2,163 while customers with $1 million or more in ARR increased to 293. Dollar-based gross retention of 97% continues to be best-in-class, and our dollar-based net retention rate for the quarter was 115%. Expansions are driven by the quick time to value and the broad applicability of our automation platform. A great example is AGS Health, a customer since 2021 that currently uses UiPath to automate their claims tracking, eligibility verification and payment posting processes. In a competitive win, they expanded their usage of document understanding, highlighting our unique AI capabilities, such as our AI trust layer and human-in-the-loop model training as competitive advantages, scaling from 6 million documents to over 20 million documents processed and saw a 95% accuracy improvement. With support from their CFO and CTO, they will be adopting document understanding across their payer and provider departments…

Thank you. We’ll now be conducting a questions-and-answer session. [Operator Instructions] Our first question today is coming from Raimo Lenschow from Barclays. Your line is now live.

Hey, perfect. Thank you and congrats on a good quarter. My first question was like, if you think about the changes that you wanted to make in terms of selling more on a departmental level going back a little bit to your roots, Daniel, you talked about it last quarter. What progress have you seen there? And like what are you seeing in the numbers? Is that showing in the numbers already? Is that showing up in pipeline? Talk us through a little bit about the progress you're seeing there.

Well, I want to be very specific that we want to address both C-level suite type of selling with departmental level. And look, it's still early to comment about the progress, but we've made quite a few organizational changes. We have appointed a new leader in North America that I think he was with the company previously and he can definitely understand our land and expand business while it's very versed into talking to executives. We've done quite a few changes on the central organizational level, we regionalize some of our functions, and we made clear to the entire company that customer centricity is going to be the core principle to our business.

Okay, okay. Perfect. Thank you. And then, Ashim, like how do we -- like congrats on the expanded role, like with a lot of other organizations. I mean with so much to do, you're growing at a high scale, at a healthy clip. Do you think that that's kind of a permanent thing for you? Or should we think about this more as a temporary solution?

Look, I think Daniel looks at it as giving me long-term goals for the company. We don't treat -- but anything could change, Raimo, from that perspective, as Daniel always will evaluate the organization. My mandate and my goals that Daniel has given is really make sure that our enabling functions really become in service of the customer and over the field and to drive connectivity across our organization, which we talked about is something that we needed to improve on, and as well as continue to drive the operational efficiency and streamline the organization and continue to drive and streamline organizational processes, et cetera. I'm excited about the opportunity just to continue to work with broader sets of teams. And we look at this as an entire leadership team that is really focused on the goals that have been laid out on, and that's really what we're focused on today.

Okay, perfect. Thank you.

Thank you. Next question is coming from Mark Murphy from JPMorgan. Your line is now live.

Thank you. Nice to see the stability in the operating results this quarter. Daniel, we've been noticing the term agenetic is suddenly becoming very popular. Salesforce came out its agent force branding recently. And part of the notion is that agents are going to have independence and autonomy. And I'm wondering how you might think about the line of demarcation. Like if we think of a bot, and it's following predefined workload -- workflows, excuse me, it feels like predefined logic, you need humans to set up the models and all that? And then if you think about an agent, it's acting independently, they can adapt, right, maybe sometimes without instructions. How are you thinking about that line of demarcation because I think it might be at the root of some of the customer confusion on where RPA might fit into the AI landscape? And then I have a quick follow-up.

Yes. That's a great question, Mark. We really think of a agentic process automation as an evolution of robotic process automation, I actually we started to socialize the agentic process automation term during our tour event in London, in Paris at the beginning of the summer. And we introduced the concept of robots and agents working together. And to me, an AI agent is basically a robot, if you want, that has some more new skills. And I think there will be multiple type of agents. For instance, there will be agents that are capable of extracting information from long and complex documents. And users, human users will be capable of interacting with these agents asking questions. And in turn, they can ask the agents to perform actions for them. There will be agents that can make more intelligent decisions based on data, and they can route a process in a more dynamic way. As you can -- as you know, for sure. Robotic means that the series, the steps in the process are stitched together in a fixed way. And agentic workflow might have dynamic routine as part of the process. I want to iterate where is really our strength here. And it is in combining actually, robotic automation with agentic automation as part of our process orchestration platform, because I think the key differentiator in customers deploying agents will be in how well they are integrated within the business platform and how well we can orchestrate between robots, agents and humans. And I think we are uniquely positioned to bring the power of LLM based agents into our platform and offer this level of orchestration.

Okay. That's a great explanation. And Ashim, I wanted to ask you, do you see any line of sight to a point in time where some of the AI confusion might dissipate and maybe begin to turn into kind of a full-blown AI tailwind for UiPath, like in other words, customers might reeducate and understand and how to move jointly with AI and automation because I guess I'm curious, could we look on this period of softer ARR growth, could we look back on it and maybe say that it was just -- there was a bit of a temporary period of confusion before customers kind of figured it out.

Look, I want to be careful about giving any type of long-term guidance implied in that, Mark. At the same time, what I can say is we're investing in the platform, and we'll continue to invest in the platform and our AI capabilities because we see it as a meaningful opportunity to drive value and differentiation with customers, which in our minds, reflects on the conviction that we have in the company. In the script and other areas, Daniel has already talked about, customer conversations are already becoming clearer for us, right? Like people are seeing the linkages between AI and automation. So we're already seeing positive response and more clarity from our customers, how the AI narrative translates in the broader market, confusion moving in and out because of broader factors and as that area evolves. I think we're all going to -- we all take it day by day and quarter by quarter. But long term, we feel very good about what AI is bringing, and we're investing because we do believe it has a meaningful ROI and reinforces the durability of our growth rate.

Thank you very much.

Thank you. Next question is coming from Bryan Bergin from TD Cowen. Your line is now live.

Hey guys, good afternoon and congrats Ashim on the expanded role. My first question, just on demand. Is it macro variability has been a pretty consistent message in how you've described, how enterprises are behaving now for several quarters, we understand things deteriorated last quarter, I guess, late March into April. Can you just comment on what you saw through the balance of 2Q and into August as well?

I think we saw things pretty stable, Bryan. We still describe the macroeconomic environment is variable. We've talked about the commercial end or the lower end of the market, having a higher degree of impact, and we see that to be -- to remain consistent. And we see that just really broadly across all geographies, et cetera? I do think that as our execution improves, and as we've made -- as we've streamlined different areas, I think we're adopting well to the environment. But I do feel like the environment is stable versus last quarter. And we didn't really see any ups and downs month-to-month within the quarter.

Okay. And then as it relates to restructuring and how we should think about potential yield from that, can you comment on whether that the restructuring actions you're taking, does that impact that 20% long-term adjusted operating margin target you had? And is it kind of going to provide upside there? Or is it more of a means to achieving that?

Look, I think that we're going to update our long-term guidance at the appropriate time. What I -- what we do feel in our restructuring efforts that we've taken and that we're going to continue to look at different ways to streamline the organization. We do feel like there's more efficiency to be had there, Bryan, and then we'll update that on our long-term margins as we go. We have always said that we're going to be 20% plus in terms of our long-term margin. So what that plus looks like, that's what we'll update at the appropriate time.

Okay, understood. Thank you.

Thank you. Next question is coming from Matthew Hedberg from RBC Capital Markets. Your line is now live.

Hi, guys. This is Mike Richards on for Matt. Maybe going off that last question there. I was wondering if you could provide some more details on the restructuring just in terms of like sizing and what areas were impacted. And then also if you're accounting for any disruption between the restructuring or the general organization changes and guidance? Thanks, guys.

Yes. Maybe let me start with high level overview and then I'll let Ashim to bring more color. I think largely, we have restructured our central functions. And we like -- we were looking at more like sales operation, sales enablement functions and especially. Also part of restructuring, I can tell you, we are -- basically, we look in all areas of the company. And I think we -- our goal is longer term that this restructuring into bringing a great level of efficiency and agility into the company.

And then just in terms of disruption, we provided our guidance in the last quarter earnings. I think there's no incremental impact to that, that I would say from a disruption standpoint, we would account for at this time. Again, as Daniel said, when it's a -- lot of the streamline -- a lot of the central organizations, they didn't really impact the growth of the company, right, and growth rate of the company. they really were -- there was a larger disconnect between those organizations and the field. So that's one of the reasons why we did not see that disruption or why we don't feel like there is a meaningful disruption that needs to be singled out.

Thanks, guys.

Thank you. Next question is coming from Keith Weiss from Morgan Stanley. Your line is now live.

Yes, this is Sanjit Singh for Keith Weiss. Dan, you laid out a number of initiatives across operations, products, partners, that customer success. I was wondering as you sort of look at sort of the near to mid-term, where do you see the lowest hanging fruit in terms of getting back to a better growth trajectory? And then I have a follow-up.

Look, I think we continue to see, as we said in the last earnings call, it's to make our teams working well together. This is basically -- it was our first goal to break the silos into the organization and make sure that we align everything in the interest of the customer. So for example, some of the low-hanging fruit was to put back customer success into the region, while keeping some kind of centralized program about it and same with our technical account management. We have simplified some of the row nomenclature. And yes, it's -- I think -- it was a lot about simplification and moving people into the regions. Ashim, anything to comment?

No, I think so. Look, I think the first step was improving execution, as Daniel said, and that meant breaking down the silos and really connecting the teams. I do think the investments that we're making that Daniel talked about in terms of agentic, the investments in process orchestration, we gave examples of the test deal that we won in the quarter. Those are all evidence of different parts of our strategy that as we continue to drive and execute, we feel reinforce the durability of our growth.

I really appreciate that perspective. And then sort of reason to my follow-up. On the product side of the house, clearly, there's a lot of innovation going on. We have Autopilot GA coming up, communications mining, process orchestration, Dan, what you highlighted. Historically, when you've talked to customers in the past, some of them have commented that the sort of breadth and depth of the product portfolio was a little overwhelming in terms of where to invest that incremental dollar. Can you sort of talk speak to how the pricing packaging side is evolving along with some of the restructuring changes in terms of making the solution more digestible into the enterprise.

Yes. We -- I think one of the major initiatives that is actually in progress is to look at our pricing and packaging and come up with -- maybe even quite a different model that should tie our pricing more to the value that we deliver. I think it's a bit too early to comment on this one. But on the -- also on the platform in itself, we are having some key initiatives. Maybe we talk a little bit about them. But -- we -- it's called -- internally, we call it like Unify build type. So we aim to present our platform in a much more consistent way to the developer. So basically, anyone using the platform, we have all the tools better integrated. So they will create an application easier. For instance, to give you an example. If you want to create like an onboarding application, you can start with building the user interface and then you can connect very easy the user interface with some kind of automations and then the automations can take advantage of our communication mining or document understanding or data service and everything will be completely integrated. So it doesn't look like you go to different systems. So I think that will also help customers to understand better our offering.

I really appreciate the perspective. Thanks a lot.

Thank you. Your next question is coming from Siti Panigrahi from Mizuho Securities. Your line is now live.

Thanks for taking my question and Asim, congratulations on the expanded role. So going back to the, let's say, new business, you talked about challenging macro environment and even some sort of confusion between this AI and RPA, where to invest. But if we dig into the expansion side of your installed base, what are the opportunities or challenges you're seeing at this point?

I think when we look at our expansion, I think the first thing I would just note is like our customers that are between $100,000 and $1 million, they are continuing to expand at 120-plus percent. So really making sure that our customers get to a certain scale steady across our 10,800 customers, that's important. That goes down to what Daniel has reinforced not just the C-level, but the grassroots level of adoption and making sure we're connected at that base area. The second piece is the more people adopt our full platform and features document understanding, intelligent document processing. When you look at many of the larger deals in the quarter, they're not core RPA alone, and they haven't been for a while. Those deals have multiple elements of our platform, if not the entire platform and continuing to drive that awareness and continue to driving that within our customer base, those are kind of like our two biggest areas. And frankly, the personal productivity side, that is an increasing competitive area. We've always talked about that. That's not the majority of where we want to play. So continue to drive enterprise grade use cases and solutions with our customer. That also continues to be a priority that really bolsters the dollar expansion rate for us.

That's great. And a follow-up to, I think, Mark's question earlier about the agentic automation. It's certainly now increasing competition. There are other vendors now with agent AI coming in, but it's good to see the innovation and the investment you're doing on the product side. But where do you see the sweet spot? Is it more your product is more addressing the installed base that you have, that's where you have the sweet spot? Or do you think you can effectively compete with the new deals against the new set of competitors?

Well, I think we have some distinctive advantages. First of all, we have a low code platform that our developers are used to. And they are using our low code platform to build agents as well. A lot of the like new entrants, new startups are targeting more like professional developers. We work more with our automation developers, and it's quite a large population. So we aim to give them all the building blocks to build agents. So that's one of our advantage. Second is these agents are not so useful if you don't pair them with actions. And this is, I think, where we will shine and we have a unique advantage to actually deliver agents that understand data or can make decisions and can call actions. And first of all -- and also think about it's not enough to build 1 single agent. An enterprise will have maybe 100s and 1,000s of agents over time. So it's equally important to orchestrate these agents, manage them, offer them in a secure and governed environment. And this is actually built in, in our platform. And it's not -- we spent many years to build the scalable orchestration platform, it takes really a long time to have it. And we have -- we have it already. We just are taking the best of LLM work, embed it into our platform and deliver easy to our customers.

That’s great. Thanks for the color, Daniel.

Thank you. Our next question is coming from Kirk Materne from Evercore. Your line is now live.

Hi, this is Chirag on for Kirk. Congratulations on the quarter and thanks for taking the question. So following up on one of the prior themes that was brought up, how are you finding the right balance between selling the automation platform versus selling core RPA? You're clearly seeing success with large customers and platform adoption. But are you finding that certain customers are just looking for core RPA when they land? And what's your philosophy on approaching those accounts?

Well, RPA is a pretty powerful technology. And it can go to really a long distance in addressing customers' automation needs. And if you think of how we build our platform is really going after white spaces around RPA, so RPA naturally evolve into a business automation platform. But our ability to emulate human users is the core principle that is behind our platform. In a way, this is why if you think today, AI fits so naturally -- gen AI fits so naturally into our platform because gen AI, it's an imitative of how human mind works type of technology. And that's -- again, that's even since our IPO, we made it clear. Our platform emulates human users. That's the core tenet of what we are building. So in this sense, it's a natural extension from RPA to broader automation to an AI-powered automation platform.

Okay, thank you.

Thank you. Next question is coming from Terry Tillman from Truist Securities. Your line is now live.

Hi, this is Dominique Manansala on for Terry. So just looking at the recently achieved FedRAMP authorization, could you provide more details on your progress and customer interest in the pipeline you've seen in the public sector so far? And are there any specific government agencies or verticals where you see the greatest potential for automation adoption?

Well, I think public sector is one of the fastest growth industry for us. I'm very happy having achieved the FedRAMP authorization. I think this is going to accelerate our business in public sector. We also are looking forward to take the lessons learned while building FedRAMP into other countries and territories. And power more of our public sector business. So I think long-term, we are seeing an increase of the percentage of revenue in our company coming from the public sector for sure.

Great, thank you.

Thank you. Next question is coming from Michael Turrin from Wells Fargo. Your line is now live.

Hey, great, thanks. I appreciate you taking the question. We've touched on the transition a bit and the slight shift in priorities with Daniel stepping back into the CEO role. Maybe I'm curious just to go back and if you could provide us with an update on how those efforts are progressing? And in particular, we're looking at the customer metric and noticed an uptick there for the first time in a couple of quarters? And so I'm wondering if that's at all reflective of some of the changes in focus you're implementing? Any commentary on just new customer additions and what you're seeing there is also helpful. Thanks.

Look, I think -- like we said, I think we feel like a better connected team and a more streamlined team will execute better. And I think that should reflect more and more across every part of our core metrics and our core financial results. What I'd still say, Michael, is I don't think our philosophy has changed. We're still looking after quality of new logos versus quantity. I think the uptick, it's a good quarter that we have there. But I don't look at that as a change in philosophy or strategy. I just think about it as better execution overall, and it's an area that we'll continue to monitor. We still feel like the land and expand is an important part of who we are, but that expansion motion also continues to be a primary driver. And frankly, when we're talking into and inspecting our pipeline looking into our different regions and territories, we ask about both new customers as well as expansions, and we're really pleased with the response that our teams right now are giving us and the execution levels of this quarter that we're starting to see.

Thanks and congrats on the expanded roll, Ashim.

Thanks, Michael.

Thank you. Next question is coming from Scott Berg from Needham & Company. Your line is now live.

Hi, everyone. Thanks for taking my question here. I'll just go with one in the essence of time here. Ashim, one of the things you mentioned was cloud revenues up 65% year-over-year to, I think it was just over $850 million. Help us understand, I guess, what deal composition looks like. That's a big number. It's up a lot. I know you're kind of pushing that platform or some of those modules and use cases more. But as we think about the business maybe for the balance of the year, how much of the balance is, I guess, squared on those types of use cases in modules versus maybe what you've seen over the last year or two? Thank you.

I think we've seen a consistent growth rate of like strong and elevated growth rate on our cloud-enabled customers and just our cloud in general. One of it is just overall awareness that continues to drive across our customer base, but more so their own readiness to move to the cloud and start adopting those cloud products. When you look at things like communications mining, when you look at things like document understanding, I think the value to move to be a part of the cloud continues to accrete, and we really like that. At the same time, like we've always said, we want to be customer-centric in this regard and make sure customers have the flexible choice. And that's really what we're providing and allowing them to move to their own journeys. I do think as our platform expands, I think -- and we have a cloud-first mindset in our releases, et cetera, I think that continues to drive more and more value for that customers can derive for the cloud itself.

Got it. Very helpful. Thank you for the question.

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you so much, everyone, for your questions. I would like to remind you that our user conference event is coming in just six weeks. I would like to see many of you in Vegas, and I'm looking forward to meeting also many of you over this quarter. Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.