UiPath reaches an inflection point with AI - but won't be shoehorned into an acronym

When it comes to getting the most from digital transformation, UiPath has made it clear that customers are looking for more than AI.

It has been a solid second quarter for the enterprise automation software vendor. UiPath co-CEO Rob Enslin emphasized during the latest earnings call that he was pleased with the performance during this period. Why? Some of the highlights include:

• Company revenue grew 19% year-over-year to $287.3 million

• ARR of $1.308 billion increased 25% year-over-year

• Cash flow from operations reached $44 million

• Non-GAAP adjusted free cash flow reaches $47 million

UiPath brought its total customer base to over 10,000 during this period. Enslin acknowledged that “the lower end of the market has been harder to call, particularly new customer acquisition”. My colleague Jon also alluded to the scrutiny of investor criteria and fickle Wall Street expectations in his interview with Enslin. However, Enslin remains positive:

I want to be clear, we feel good about the business and the role automation plays in digital transformation. We continue to execute against our strategic initiatives and there is a nice pipeline building as we move into the second half of the year.

Further weight was given to this by Enslin’s announcement: 

I want to highlight that our board of directors has authorized a $500 million stock repurchase program which underscores the confidence we have in our business, our ongoing cash flow generation, and the strength of our balance sheet.

UiPath also had further announcements on initiatives: 

• UiPath Automation Hub - a cloud-based platform that makes it easier for businesses to build, deploy, and manage RPA solutions.

• UiPath Process Mining Suite, which uses the data from business applications to give a detailed understanding of complex business processes and how to make them more efficient.

An inflection point with AI

Yes, AI may be the topic on everyone’s lips - but AI has been woven into UiPath’s platform since the beginning. While announcements from vendors proliferate on the theme of “we’re using AI too!”, how does UiPath see itself standing out from the crowd? Co-Founder and Co-CEO Daniel Dines spoke to the needs of customers:

Well, first of all, I would like to make clear that we believe generative AI doesn't change the competitive dynamic when it comes to automation platforms. In the end, most of the use cases for Generative AI are in the creator space. So you use generative AI to create artifacts that are deployed on the platform. I think that plays to our advantage.

While this doesn’t constitute a USP, he added:

I want to also point out that there is no company that has an exclusivity to a particular gen AI technology. We are using, for instance, Open AI, Google Vertex, Amazon Lambda, everything that is in the market. So I think that mid- to long term, the creator gen AI will be basically commoditized. And the essence would be that the best platform is going to win even with better chances in the market because the adoption will also be democratized.

Customer impact

Aside from the reactions at standing room only events earlier in the year, Enslin noted that the opportunity to showcase the progress made in automation with generative AI has taken customers by surprise:

A Texas-based digital health system recently automated their claims form intake process. Using our accelerators, they expedited their design-to-deploy time from more than eight weeks down to just two.

UiPath’s partner ecosystem is proving to be valuable in its work with customers - one example included Ashling Partners’ expansion work with security solutions company ADT, having laid the foundations for digital transformation with an automation program for operations and customer service teams. During Q2, this was extended to provide customer service agents in ADT’s call center with a single pane of glass (an appropriate term, given the company’s focus) to give agents the bigger picture in one space and reducing the burden on manual, time consuming tasks. 

Examples turned from health, to security, over to agriculture as Enslin laid out another example showing progress made with SAP: 

During the quarter, a German agricultural company challenged by their S/4 migration, selected UiPath in a competitive win based on our holisbtic integrated platform. They are in the process of implementing test suite for regression testing on their S/4 migration and testing of all SAP modules. They also plan to automate processes in their finance department and incorporate process mining and AI into their automation program. 

My take

UiPath continues to show confidence in the decisions made back in September last year, and regularly returned to the visibility and feedback from decision makers and customers during the discussion. It will be interesting to see how this develops through the leadership transition as Enslin becomes sole CEO and Dines takes on the new role of Chief Innovation Officer.  

The firm is making strong efforts to collaborate not just in C-Suite conversations but with customer’s systems integrators. This strikes me as a positive approach, and plays to the strengths mentioned by Dines. As well as decision-makers, vendors can underestimate the power of those working with the integrators - systems experts can make a significant difference to the success of digital transformation programs because they know the pain points inside out.

Consistency was another theme throughout the Q2 report. Both Enslin and Dines were determined that UiPath’s platform can’t be shoehorned into an acronym, as Enslin remarked:

I would not classify it only as RPA. It is about the platform, it's about document understanding, communication, mining test, mining the moat that makes a difference and infusing our gen AI capabilities, which are actually visual for customers to see and how that benefits them.

This quarter has buoyed expectations that UiPath’s progress is moving in the right direction, and the upcoming Forward VI event should provide some proof points of more advanced automation and process mining value from customer use cases. I'll be on the ground for the event and look forward to pursuing open questions with UiPath there, not least about the role of generative AI.