 Hey everyone, good morning. Welcome to theCUBE, the leader in live tech coverage, live UI path forward six. This is day one of two days of wall-to-wall coverage on theCUBE. Lisa Martin here with Dave Vellante and Rebecca Knight. Great to see you both. This is some weird dust. I'm going to be going a little bit like a tennis match here. I loved the keynote day because the voice of the customer led off in such a dramatic way. I always loved hearing the validation of the brand, what they're doing with AI and automation through the voice of the customer. What were some of your takes on, Dave? We'll start with you and Rebecca. It is rare that a company does that. And what they did for those of you who didn't see the keynote, it was like they had three customers up there and they started with one. It was like, and the light went on that one customer and then he explained sort of their journey and then the second customer. And they weren't like long drawn out stories. They were nice little sound bites. It's theatrical. It was dramatic. Very dramatic. So that was, I kind of liked that. I think UiPath has done something like that before. I may be confusing it with another firm, but I thought UiPath one time had a customer introduce the show, which is pretty rare. And I mean 99% of the time, right? It's the CMO or the CEO coming out, thanking everybody. So that was kind of cool. I thought that was great. A lot of them are going to be on the show the next couple of days. Rebecca, what were some of the things that stuck out to you in the keynote? Well, just how big and theoretical the questions that we're going to be grappling with here is this was really center stage because usually these kinds of keynotes, it's really, it's we're pushing this product and this and this is what we're doing. But these were some sort of big questions that we're wrestling with as society. We had Mary Tetlow, who of course is the chief brand officer and she really set up the question of AI, good or bad? Is it going to, are we going to profit from it? Or will we be destroyed as Elon Musk and Stephen Hawking have warned? Will it solve the world's problems? Or will it create more? Sundar Pinchai obviously said it's more profound than fire and energy. I mean, this is the major technological, the major advancement, the major thing of our time really. And so setting up this dichotomy is really going to be what we're going to be talking about frankly for the next few years, but especially these next two days. And ironically, you know, AI is all about or maybe not all about, but it's largely about automating sort of the mundane. Well, that's what RPA has always been about. And that's how UiPath got started. And this was a rocket ship company. Daniel Dinez, the founder and was the sole CEO. Company took off. It's series D, or no, sorry, series F I want to say was probably $38 billion valuation. It's now a public company, probably trading just under $10 billion. So they got some work to do, but what they did is they brought in Rob Ensland who's coming on later. He's been on, you know, he was on last year basically to bring in a little bit of adult supervision. You know, but Rob came out of Google and he's a go-to-market expert and he was probably very, I can't speak for him, but my guess is he was frustrated at Google because it's not a sales culture. It's really an engineering culture. And, you know, Google's on that sort of slow path and now AI is really a rocket ship for them. But Rob brought that sort of go-to-market discipline and it was a perfect compliment in my view to Daniel Dinez who's a, you know, serious, you know, developer, technology visionary. He's heads down doing AI with the product teams. I'm sure he's got his hands in everything, but Rob has really restructured the go-to-market. They have this thing called NorthStar, their NorthStar Playbook, and that we kind of did a play on words with NorthStar and our breaking analysis. But it's starting to work that, you know, the challenges with the interest rate environments, they have a long way to go before they can get back to that $38 billion, but they're in the right spot. But the big question, right, the existential question for companies like UiPath, is it a tailwind or a headwind? What are your thoughts? You did the breaking analysis about a month ago after their earnings. You showed ARR at 1.3 billion, up 25% year on year, million dollar plus accounts up, 30% year on year. What did that breaking analysis reveal? Well, so the problem with early RPA implementations is they were very narrow and very small. They had trouble scaling. You had some examples companies like GE, for example, that scaled. But most, the vast majority of the long tail of implementations was just a couple of bots. They will try it out and see how it goes. You know, maybe automate a couple of processes. So what UiPath did, UiPath and Automation Anywhere were sort of in this inter-nacine startup battle. And then UiPath went out and made a bunch of acquisitions and re-platformed everything. Not just for the cloud, but they brought in process mining. Interestingly, just before ChatGPT was announced, they bought a company called ReInfer last year, you remember? And they basically are natural language processing. So they expanded into process mining, document mining, and really built out a horizontal platform. And it's allowed them to compete much more effectively, not only with Automation Anywhere, but with Microsoft. And so I think AI is both. It's a headwind and a tailwind. I think AI is going to pick up a lot of these mundane, you know, the way we use it, right? To summarize documents, or you put a bunch of text in and say, what does this say? And UiPath can probably do that better than ChatGPT, but the real use cases are going to be those hardcore domain-specific, industry-specific use cases that need a lot of supporting software infrastructure, and that's where UiPath has to prove that it's got a business case there and can give a financial return to the customers. I think that's exactly right. I think that they have a case to make. I mean, you said this in your analysis, Dave. You said the bottom line is Daniel Dines has released operational and go-to-market responsibility to Rob Enslin so he could focus on product innovation and AI must be a top priority. And so that would be my question to you in the sense of what are the key messages you want to be hearing from management here at Forward Six, and then also are you buying what management is selling, frankly? So one of the big things that they're selling is that RPA and Automation is moving, is moved from the back office to the front office. It's moving, it's moving slowly. And I think executives that you talk to in business are trying to figure out what to do with AI. And I think that companies like UiPath are going to embed AI into their product so to the extent that you buy their product, you're going to get AI. And that's going to be the same thing with Salesforce and Oracle and SAP with the partnership and Workday and on and on and on. What I really want to see is how that business case evolves. So you've got to, and I hate to say it, you're the people person here on the stage. It's going to come down to how many jobs I can either eliminate or hold off on hiring. If I can reduce hiring dramatically or reduce headcount, that's going to drop right to the bottom line. I think revenue enhancing use cases are going to be harder to find. I was a little unnerved by that messaging that I heard today, which is this idea that it's got to be a top down thing, that AI, we know, we know from the research and we heard on the stage today that CEOs are excited about this. This is something that is lighting them a fire. But we also know the workforce is nervous and nervous because of the jobs dislocation that we've already started to see and that we know we're going to continue to see. And so I think in terms of messaging, in terms of getting people on board, we have to do, or companies, organizations, including UiPath, have to follow what Bobby Patrick was saying up there at the chief marketing officer. We're hopefully going to have him on theCUBE too. Talking about how AI, anything AI can do, AI and automation can do better. And AI can help offset the labor shortage. It can help deal with challenges related to an aging workforce. And it can do, as you were saying, all of those mundane, terrible, awful tasks that we hate about our jobs. It's empowering. Exactly. I think you bring up a great point. I think that's what Bobby Patrick, I loved his energy about that. But talking about it really as empowerment from a productivity perspective, rather than the jobs and the things that are going to be negatively impacted, I liked that their messaging was positive on that front from simply enabling people to do more faster. And to your point, get rid of the mundane tasks that people don't like doing. Maybe get to that four-day work week. That sounds pretty good. Yeah, yeah, yeah. But the thing is, is that Dave, saying that yes, some jobs are going to be lost, but it's also, we need to then have some agency on the part of workers ourselves and say, okay, if my job's going away, what else can I do here? I mean, surely I can continue to work. I have some skills. How can I reskill? How can I upskill? What can I do differently? And organizations have to help their people do that too. Definitely. I think there's a couple of things here. One is that UiPath actually has a lot of experience in terms of how it's been communicating to employees early on in the RPA days. People were very concerned about job loss and the experience has shown, no, we love RPA because it's doing the things that I hated doing. I think generative AI takes that to a new level and I think we'll have a near term, more negative impact, maybe not negative, more disruptive impact on jobs. So you can't protect the past from the future. But Mary Tetlo hit on this. She talked about healthcare. She talked about inflation. She talked about climate change. We got some big challenges that we need technology to help solve. We're not going to be able to solve these with the tools of the past. And so I am an optimist. I think new jobs are going to be created. I mean, it's always the way machines have replaced humans forever. It's happening in cognitive functions. So it's a little bit scary in that regard. But the world has some serious problems, as we know, with the tragedy in Israel and what's going on in Ukraine and what we see with cyber warfare. And so AI is going to play a big role, both for defenders and attackers, as we've talked about on theCUBE. And I think they did a great job of presenting that from a neutral standpoint. AI, Mary talked about that. We heard from the voices of their customers what they're doing with AI and automation. I wanted to get your take, Dave, on the ecosystem. Rab had SAP on stage. Lloyd Adams, I believe it is. They're going to be on here and just Lloyd Adams in an hour or two. Talk about the impact that you see as you've been covering UiPath for, I think this is theCUBE's fifth year at forward. Yeah, I think we missed the first one and we've done every other one since. Yeah. You know, even the virtual ones. But in terms of the impact that it's making with its ecosystem, what SAP and, what Deloitte is going to be doing with SAP and UiPath, what's your take on how it's leveraging the power of the ecosystem? Yeah, early on, you didn't really see the GSIs participating in this space. But like the days, Rebecca, I think you and I did some service now, knowledges together. I don't know at least if you ever did knowledge. I didn't know. But so we saw a similar sort of ascendancy of the ecosystem. It was actually even probably slower there. I think a lot earlier in UiPath's history, at least modern history, we saw the big, the Deloitte's, the EY's, the Accenture's, the Capgemini's participating. Having booths here, bringing customers, bringing customers onto theCUBE. So that's been a key part of the growth because we know that those guys will drive business. And they're at a spot in the organization. They're coming in at the board level. And these are board level discussions. It truly is being driven top down. By the way, there's a lot of bottom-up activity going on. There's a ton of shadow AI going on right now. And they're going to meet in the middle and then figure that out. So I think that is a really good point that you bring up and it's very positive. The other thing this morning, and it's somewhat related, is this whole notion of citizen creators. That they're not necessarily technically oriented, but they're technically oriented business people. And so that dramatically expands the scope of impact that you can have with something like UI path and automation. And I think the GSIs are going to play a big role in helping organizations rethink their skill sets. So you probably see this in some of your work. Yeah, no, absolutely. And as you said, as the parent of some Gen Zers, I already see how non-technical people are already learning the skills and the tools that they need to create content, to do things differently, to do things faster, better, more effectively. And so it is really excited. We are going to be talking about citizen development and how you get it going in your organization. But then also not to be too Pollyanna, there are also some real challenges to it. There's a lot of security and governance, privacy issues. And if you don't necessarily have the chops, the technical chops, and you are doing it from more of a general business perspective, you might miss some of those things. So we're going to be talking about all of that. And I think that really is UI path's big opportunity here to make AI a tailwind. It has to do so. We developed with John Furrier and Rob Streche, this power law of Gen AI. And we kind of use the music industry, it's like a right angle where all the big movie or music producers have most of the volume and then there's a super long tail. It's like this right angle. AI is maybe a little bit different. It's similar and you're going to have open AI, you're going to have Google with Vertex and Microsoft and Amazon and Meta with Lama too. They're going to be the big dominant consumer brands. But then there's going to be this big long tail of industry specific use cases. And so we developed this in the piece around UI specialized governed AI models, using computer vision better than some of these other folks can, the sales assistants, the customer service, very specific industry specific automation in insurance, healthcare, financial services, manufacturing, that use case specificity, that domain specificity is not generally, I don't think going to be the domain of the big cloud guys. Now, their ecosystem will pick up on that. You know, a lot of the GSIs that we've talked about will probably develop some of those tools, but I think they'd be faster to market if they're going to do that with a UI path. So that's their opportunity in my view. I'm glad that you brought up the industries. A lot of them featured on main stage today. A lot of them going to be here on theCUBE. We're going to be hearing some industry specific use cases with demonstrable results about how AI and automation are really helping these organizations move forward. We have our first customer up is Mayo Clinic healthcare. We've got insurance, we've got financial services. So it's going to be great to hear firsthand from these industries what the use cases are that they're driving forward with UI path and its ecosystem. I'm excited to hear about that. Yeah. And how they're getting it work, getting it to work in their organizations. I mean, that's the theme of this conference, AI at work, but there's so much double entendre to that. There is, yes, yes. Yeah, and I would say as well, there's just massive opportunity for innovation here, but it's really uncertain because a lot of people, they're maybe afraid to do it in the cloud because they don't want IP leakage. But we kind of heard that story before and the cloud ended up winning, but then there's this notion of latency and that's really going to matter. So, and the lawyers and the compliance folks and the auditors are definitely more in control than they have been in the past because of intellectual property and IP leakage and studio point security and compliance. So it's very uncertain now. So I think those companies that can make customers feel comfortable and I come back to the business case. There's got to be a clear business case in the enterprise. One of the things we saw in the data and the ETR data is AI, as we came out of the pandemic, during the pandemic, it was very, very high because people were trying to automate. Coming out of the pandemic, you saw the spending shift where AI sort of dropped and other stuff sort of picked up, maybe refreshing the headquarters and things that hadn't been spent on. Once ChatGPT was announced, AI popped back up, but budgets haven't increased. So they're robbing Peter to pay for AI Paul. And so at some point, the executor's going to say, okay, what are we getting for that? And if we don't see a clear return, then we're going to pull the plug or at least dial that down. If they do see a return, they're going to get gain sharing and they're just going to create a flywheel and those that can get out front, those practitioners, those end customers, those industries that get out front, it's, they're going to win and they're going to win big. Quick question for you. In terms of the spending momentum, what did you see first half versus second half? We're in October 2023. Is the trend going up from a budget perspective? Are things starting to open back up such that organizations might have a longer runway to really determine the ROI of these AI projects? No, in fact, you know, the term, the phrase higher for longer in this past week's breaking analysis, we, the title was lower for longer. And what's been happening is we entered 2022 with an expectation of 7.5% IT spending growth in the enterprise all the way through 2022, that declined and it ended up, we exited the year at around 4.1%. Wow. So we entered 2023 at 4.1%. We're now down to 2.9%. Wow. Okay, now there's wishful optimism. In my opinion, it is wishful hope that will pop back up in 2024. The latest ETR survey said 3.8%. But that was before Israel Hamas. Yes. And, and you know, the sentiment in the market right now is, you know, things, I mean, with oil and everything else, that stocks aren't necessarily an attractive asset. It's not the time to put risk on. So I personally think we're going to see that sort of flatness for a while, unless and until AI can start driving that productivity. So my current forecast is called for some of that showing up in Q4 numbers, like as we exit Q4, and then sort of a bigger ramp up throughout 2024. If we don't see that, if that gets pushed, then I think budgets are going to stay pretty flat for a while. Wow. Last question for you, Dave. As we have two days of wall-to-wall coverage on the queue, we've got its ecosystem, its leaders, its customers, partners, et cetera. What are some of the things that you're most excited about? Do you have an analyst relations activity this afternoon that you get to go off? So you actually get a deep dive? It's very strange. Normally these AR activities are done, not normally. Often they're done the day before on day zero. I'm glad they didn't because we would have had a fly on Sunday, completely blown off our Monday, which was a holiday in some parts of the world. But so yeah, they've done it like right in the middle of the day today. So you guys are going to hold down the fort. I'm going to pop out, listen to probably the Q&A with Danielle Deniz and Rob Enslin. So that'll be good. I don't know how big the analyst program is here. I think it's very small right now. They're still trying to figure that out. So yeah, that's going on. Normally these things they put, they'll have the executives come and give the vision, they'll talk about all the product stuff that's coming. They thought it's kind of product announcements this week. You guys saw the, I think we're still under embargo for, but so, but there's, is that been announced yet? We'll see, we'll hold that, we'll hold that. I think that was announced today, although you didn't hear it on stage. They didn't talk product. We didn't leave early. So it could be, but often times day two is product day. But there's not a ton of, there's not a fire hose like you get it reinvented. Yeah, definitely get the vibe. So I think part of that is let's sell what we've got. They've gone out and they've built a lot of product, they've re-platformed, they've purchased a lot of companies, they've done a lot of integration. So I think they want to show, hey, we're really investing in this, we're advancing that forward, here's how to use it. The last thing they want to do is just sort of refresh the whole portfolio again with new products. You want to really double down on what you have. And so I think that's what we're going to see this week. And I'm really curious about this, Rebecca, your question that you're buying and what they're selling, this move from back office to front office. I think this is really important. And there's definitely evidence of it, but I don't know if it's driving meaningful revenue just yet. I think the other thing to watch for, and we won't hear much of it today, but in the data, the new logos, there was a lot of positives in UiPASS recent quarter. ARR 1.3 billion up 25%, a 30% growth in million dollar plus accounts. The operating margin was up to 10 and a half percent, up from a negative 4.6%. Their operating cash flow was 46 million and their free cash flow guide blew away the consensus by 100 million. They announced a $500 million share buyback, which always makes shareholders happy, but new logos were off. And that's okay, I'm not that freaked out about it. I'd like to see them get more out of the existing logos and they're very strong in the global 2000. You know, bookings were a little soft in the quarter, maybe softer than expected because bookings ultimately drive revenue. But I think getting business out of existing customers in the global 2000 is very important for companies like this, when we're in a downturn, you could say something similar to Snowflake. We've seen, for instance, a deceleration in their momentum, but the ETR methodology is customer counts, okay? It's not dollars, the dollars are ultimately what matters, so that's something that we're looking for. The importance of new logos is it may take months, 18 months for them to start ramping up, three months, six months, nine months, but 18 months they're buying more and more and more, going from, let's call it 50 or $100,000 accounts to multi-million dollar accounts. That's really what a software company like UiPath wants. So that's something that is going to take time. This company, investors in UiPath have to be patient. They're onto something, they've got a lead, they've got a lot of competition, particularly from Microsoft, but they have a much better product. And they've got to get people to drink the Kool-Aid. Yep, yep. Well, we're going to be talking about that. And I can confirm that they launched Autopilot, an AI assistant for every business worker. First link there on Google, siliconangle.com. We're not giving away state secrets. We're not getting AI. Well, that's what we want to understand. What's different between Autopilot and these co-pilots? What's unique about that? What other capabilities are in there that differentiate UiPath from the mainstream? Absolutely. We're going to be talking about all that. We've got a great lineup the next couple of days. Rebecca, Dave and I will be here talking with UiPath leaders, visionaries, industry experts, customers, partners. You got it, you got questions? Comment on us on our Twitter. We want to bring you into the conversation. Thanks so much for watching our kickoff of day one for Dave Vellante and Rebecca Knight. Lisa Martin, be right back with our first guest. Stick around.