UiPath CEO Rob Enslin resigned, the robotics process automation company cut its second quarter outlook and said the company is seeing "increased deal scrutiny and lengthening sales cycles for large multi-year deals."
The company's biggest challenge will be selling its automation platform and navigating the future of robotics process automation as generative AI and large language models gain traction.
Given the news, enterprise technology buyers have to navigate the following:
- Enslin is resigning effective June 1. Enslin revamped UiPath's go-to-market operations. Daniel Dines, former CEO and current Chief Innovation Officer, has been reappointed CEO. Enslin and Dines were co-CEOs before Enslin took over as sole CEO on Feb. 1.
- UiPath cut its revenue forecast and projected second quarter revenue between $300 million and $305 million with breakeven non-GAAP operating income. For the fiscal year, UiPath said it expects revenue of $1.405 billion to $1.41 billion with non-GAAP operating income of $145 million. Those projections were well short of expectations.
- CFO Ashim Gupta said: "While our revenue and operating margin guidance are impacted by contract timing and duration, we have confidence in our ability to generate durable ARR growth at scale, and meaningful non-GAAP adjusted free cash flow."
In the first quarter, UiPath said annual recurring revenue (ARR) was up 21% to $1.508 billion. The company reported a net loss of $28.74 million, or 5 cents a share, on revenue of $335 million, up 16% from a year ago. Non-GAAP earnings were 13 cents a share.
The first quarter reversed gains from the fourth quarter and 2023 when UiPath showed strong traction.
On a conference call with analysts, Dines' task was to calm worries about Enslin's departure. He said:
"During the past year, I had the privilege of immersing myself in our product and engineering efforts. This experience gave me invaluable clarity on our path forward at the time when companies are looking to optimize cost and drive efficiencies without sacrificing innovation, especially around generative AI. We view generative AI as a secular trend that will continue to benefit our business."
Dines noted that UiPath saw the following market dynamics:
- Large expansion deals closed with reduced sizes.
- Sales compensation changes hit the quarter and the company is working to fix those issues.
- UiPath's sales execution was lacking.
- Sales investments have made the cmoapny less agile.
- The departure of Enslin may create some short-term disruption.
Dines also cited customer wins and noted the company would go back to its roots of driving product innovation. He cited a win in the quarter of "one of the largest pharmaceutical companies in North America that had been using Celonis."
Constellation Research's take
Constellation Research analysts Holger Mueller and Andy Thurai focused on two different themes from UiPath's earnings report.
Thurai said:
"While RPA is still one of the hottest areas, many enterprises that have under-budgeted AI are stealing from some of their RPA initiatives to fund generative AI projects. Many companies have completed RPA projects with immediate value realization. Given the current licensure model, the value proposition for RPA is also difficult to prove. In addition, generative AI has some cool adjacent initiatives, such as intelligent document processing, ITOps incident management, AIOps, etc. Those side benefits mean genAI looks better than RPA. At the current valuation levels, UiPath may look appealing as a takeover target for other large enterprise software players or private equity."
Mueller said:
"This report was quite a surprise.
When a board turns on a CEO that was installed two years ago, something went amiss. Certainly, Enslin was brought in to provide commercial acumen and grow UiPath to the next level. And for sure, given the earnings announcement, UiPath didn't deliver this quarter, always assuming the mission was to move to profitability. Given the increase in spend, there appears to have been late surprises in a quarter with larger deals not coming through. The odd thing is that the board did not want to have Dines lead the company two years ago and put him back in place. The board could be looking for a new CEO, or doubling down on UiPath's next generation product under Dines leadership."
