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The combination of RPA and AI can be a winning recipe for UiPath and its stakeholders
Think back to the late winter (at least in calendar terms) of 2022. The market for tech stocks had been imploding for the prior 5 months. But there hadn’t been any specific indications that the growth in demand for IT solutions had started to slow. Of course Fed activity, even back at that point was designed to destroy demand for capex, of which software is a principle component these days, but at that point, demand destruction was more a theory then a reality. And then UiPath (NYSE:PATH) reported, and the floodgates opened. While most IT companies have since reported elongating sales cycles, more scrutiny of purchases, and a tendency to break larger deals into chunks, PATH’s initial call has presaged a difficult selling environment for the company and for the industry. The initial sign of trouble was the significant decline in net new ARR which fell quite sharply from the January to the April ending quarter in the prior fiscal year. Other signs emerged. The dollar based retention rate, which had been 145% fell to 123% last quarter, and reported revenue growth has contracted from 39% to 7%. Adjusted for the end of the company’s Russian business and FX headwinds, an apples to apples comparison of the retention ratio declined to 129%.
The question is, has UiPath turned the corner? Is this a real turnaround, or just progress against easier comparisons? Clearly last quarter the company saw significant and unforecasted gains in its business. Net new ARR rose noticeably, from $67 million in Q3 to $94 million last quarter. That said, net new ARR of $94 million was still 13% below the year earlier level, although the best showing for net new ARR in the last year. On a constant currency basis, net new ARR last quarter was flat with year earlier levels and that comparison was much improved compared to prior quarters in which net new ARR growth showed declining growth from year earlier periods. The company reported non-GAAP net operating income of $69 million, an operating margin of 22%; it had forecast just $35 million in net operating income. Free cash flow for the quarter reached $72 million as reported, a margin of 22%; previously the company had been burning cash. The company took a onetime restructuring charge in the quarter; adjusting for that, the free cash flow margin for the quarter would have been 33%. The growth in deferred revenue accelerated sharply; it was more than $100 million last quarter, which was a principle reason for the company’s strong free cash flow margin, and almost doubled the increase in deferred revenue compared to the prior year’s Q4.
The company’s result’s handily exceeded prior expectations. It had forecast that revenues would be $278 million; they were $308 million. It had forecast ending ARR of $1.175 million; that metric was $1,204 million. The company maintained its guidance for FY’24 at the level it had forecast previously during its analyst day.
The company’s RPO balance grew by 34% year on year, and by 18% sequentially, the latter metric reflecting the seasonality of Q4. While ARR is a better representation of the health of the company’s sales motion, it is encouraging to see a backlog that is greater than 70% of revenue forecast for the current year.
It should be noted that some sequential comparisons showed declining percentage growth. While UiPath is enjoying relative success in the market, there are certainly macro headwinds, and those headwinds have affected this company along with almost every other vendor in the IT space. I was most encouraged by the strong growth in net new ARR, which I believe to be the best representation of the success of the company’s sales activity.
PATH stock remains unloved by analysts, and that remained the case even after the strong quarter and reasonable guidance the company provided. At this point, 15 out of 24 covering analysts have rated the shares hold or sell, a rather dismal statistic for this company, but in one way, a positive contrarian indicator. Simply looked at from a valuation screen that is a bit surprising. The company’s growth plus rising free cash flow margin have the shares valued below average for a mid-20% growth cohort.
The basic issue for analyst skepticism appears to be competitive concerns, and the belief that Microsoft (MSFT) in particular, with its partnership with OpenAI, will eventually offer automation products that compete effectively with UiPath. My guess, and at this point it can’t be more than that, is that UiPath will continue to be a leader in the robotic process automation space, and that analyst competitive concerns are seriously exaggerated.
UiPath, along with all other enterprise software companies, exists in a challenging world. While ordinarily the kind of results reported by the company in March would have led to a belief that the company had executed a substantial turnaround, the fact is that it is battling the same macro headwinds that are plaguing most IT vendors these days. And the headwinds are becoming more visible; as I write this, the Jolts Jobs Opening Report showed a significant drop, the ISM manufacturing index is mired in negative territory going on for half a year now, and business investment spend has been contracting. The ADP jobs report was substantially below prior expectations. Of course the macro news is not all one sided; the latest employment situations report was about what had been expected by the consensus of economists although its value as a forward looking metric is limited, at best.
So, it can be difficult to assess just how much of a turnaround has been accomplished by UiPath, and what is left to do, particularly with regards to the company’s sales motion. The company’s Co-CEO, Rob Enslin, has now assumed leadership of the go-to-market functions for UiPath. The change makes sense based on Enslin’s experience in sales management roles at Alphabet Inc. (GOOG) (GOOGL) and SAP (SAP) and the recent results suggest to me that he is already having a salutary impact on the company’s go-to-market motion.
One thing ought to be very clear to readers/subscribers. PATH shares will need a sustained risk-on market to show significant appreciation. And a sustained risk-on market is probably going to require a discrete Fed pivot. The Fed board of governors next meets in about 4 weeks. I make no forecast of what they will decide to do. There will be lots of incoming data between then and now; my guess is that much of it will present a negative picture of the economy, but whether that will enough to persuade the governors to end their tightening path is not something I can forecast with any degree of confidence.
In addition to macro data, many IT companies will be reporting. In many cases, but certainly not all, my guess is that quarterly reports will be better than feared. But I doubt that many companies will choose to increase guidance, almost regardless of their own results, or their internal forecasts. The concerns about macro headwinds are clearly approaching an apogee, in my opinion.
What I am forecasting here is that the technology of RPA will continue to be a priority for users, and will enjoy a growth recrudescence when the recession, from either a hard or soft landing starts to become visible. I believe that PATH’s strategy of combining RPA and AI into solutions that provide high ROI for users will resonate. And I believe that PATH’s retooled sales motion will prove to be effective in allowing the company to achieve share gains in a rapidly evolving and growing business opportunity. That is the basis for my recommendation-but again, it can’t work until investors decide to pursue risk-on investments on a consistent basis.
UiPath shares rose significantly in the wake of its latest quarterly report and forward guidance. The shares rose 18% the next day, and have continued to trade in the $17 range since that time. The shares are up by 34% since the start of the year, although they are down by 25% over the last 12 months. Shortly after the company’s IPO back 2 years ago, the shares actually hit $90.
The company’s forecast for Q1 and for Fiscal 2024 was cautious. It is forecasting a year on year decline in net new ARR in Q1 and for the full fiscal year, perhaps in an abundance of conservatism. Its revenue forecast calls for 19% growth this year, and it has projected that its non GAAP operating income will be almost double the level of fiscal year 2023. To reiterate, the company’s forecast for growth this year is consistent with the commitment it made to investors at the time of the company’s analyst day a few months ago, adjusted for a slightly lower level of FX headwind. While that kind of forecast doesn’t reflect the actual performance of the company in its latest reported quarter, its prudence is a function of the current environment in which companies get little benefit from providing aggressive forecasts. The company’s CFO, Ashim Gupta, like so many others these days, is putting a little extra buffer into its current forecast to account for current macro uncertainties. It is only reasonable to do so in this environment:
And overall, we have given an extra actual buffer of conservatism in there or a little extra buffer to account for the environment that’s there. So our philosophy has been the same. We have guided to what’s in front of us with — while still accounting for a little buffer for the variability in the macroeconomic environment.
Needless to say, the valuation of Path shares has compressed significantly since its growth started to deteriorate. UiPath used to be considered a highly valued IT vendor and was so when I first wrote about the company for SA back in May 2021. I couldn’t stomach the EV/S ratio of 35X back then. By the time I wrote about the company again, about 10 months ago its EV/S had fallen to around 6X, and I felt able to recommend the shares. Its EV/S ratio has remained at about 6X, while the company’s profit and cash flow metrics have improved substantially. The company has forecast free cash flow of $100 million for the current year (8% margin), compared to breakeven free cash flow last year. It is forecasting that non-GAAP operating income will grow from $65 million to $120 million
UiPath and AI-Some significant use cases
The last several months has seen an investor craze for all things AI. And software companies, being the creatures that they are, have tended to oblige investors by announcing a multitude of products and services incorporating AI. Some of the craze has driven rather untoward valuations for companies thought to be beneficiaries of the generative AI revolution. To be sure, it is generative AI and the ChatGPT offering that has gotten much of the attention. UiPath has long used AI as part of its solution. It recently held what it described as an AI summit at which it highlighted the merging of AI and Automation.
While I am as enthused as anyone regarding the AI opportunities, I try to keep my enthusiasm centered on products that can be sold, and use cases that users actually are anxious to deploy. Recently an analyst at JP Morgan Chase, wrote about GenAI as “an order of magnitude bigger “than prior tech waves. I try to avoid sensationalism in writing articles. The article was really a recommendation of Microsoft (MSFT) shares based on its partnership with OpenAI. For the record, I have, and do recommend MSFT shares, in some part, at least because of the opportunities it has using solutions created using the OpenAI technology.
UiPath has been deeply involved in creating applications based on AI/Machine learning for years now, but the company, at least from a valuation standpoint, is not considered to be an “AI” stock. That is part of the opportunity here, because the company is a significant beneficiary from the maturation of AI technology. This is enabling the PATH to offer its customers products that enhance task automation and enhance the ROI of deploying UiPath solutions. One recent example of the use of AI called out during the last conference call is a sample of what this company is doing with the technology.
For example, we use AI to build large language models for capabilities like Document Understanding and Communications Mining, which we acquired with Re:infer. During the quarter we closed the largest Re:infer deal ever with a customer who plans to use it to interpret customer sentiment across millions of emails per year to reduce manual processing, client churn and enhance customer experience.
Coming later this year, Clipboard AI shows what AI can do for knowledge workers in their day-to-day roles. By leveraging large language models and understanding the structures of content, Clipboard AI intelligently transfers data between documents, spreadsheets and apps, eliminating the need for repetitive copy and paste. We plan to share more on this and other AI innovations at our AI summit later this month.
The company acquired Re:infer in August. 2022. The Re:infer solution is a classic case of AI in that it uses machine learning to mine context from communication messages. It is the kind of practical application of AI that perhaps gets less attention because it relates to the rather arcane topic of a major transformation of workflows than some of the splashier applications that are being deployed using OpenAI technology.
It can be difficult to determine when investors decide that a company is benefitting from AI and ought to get a premium multiple as being a principal beneficiary of the AI revolution. I have no idea when or even whether that will happen to UiPath. That said, as this comment by Co-CEO Daniel Dines suggests, UiPath is announcing some rather significant solutions based on the company’s use of AI technology.
We have kind of the best AI in the world when it comes to computer vision to understand application screens. And in this — with this new advance in generative AI, I think, the best platform will be the most favor, because generative way, it’s basically a creator tool.
So in our case, this is going to accelerate the adoption of our platform. It’s going to help democratize the access to creating automations. And if you feel in the same time, while why you are not using the best tool out there when you can have the AI tool drive faster adoption.
So I think this combination between AI and the tool that the platform that is capable of fulfilling with AI comments, it’s a great combination and they are import to infuse — continue to infuse generative across our platform.
I would like to emphasize the use of GPT-3 and large language models in our upcoming Clipboard AI and this is going to be a tool that cater to all business users, basically will allow everyone to transfer to — transfer information from any source, every document to any application.
Imagine many a few dozens of fields converted transform in one step. It’s going to save tremendously in terms of productivity. And we are using a huge combination of our own AI models, GPT-3, Google, Amazon, everything that is combined there. So I am — again, I am extremely bullish for the prospects of UiPath with adopting the generative AI technologies.
UiPath, as discussed in its recent AI summit, has a variety of initiatives to facilitate the use of the technology by its customers. And that is the subject of the following section.
The UiPath AI Summit – Some takeaways
The company held its annual AI summit on March 30. I am not going to try to review several hours of presentations in an article like this. It probably doesn’t help that much in evaluating the prospects for the shares. The presentations emphasized the integration of AI into several solutions. PATH showcased some of its pre-built connectors that integrate AI technology into its own solutions. It emphasized Large Language Models. Some customers are going to use a concept called “Bring Your Own AI” which facilitates the use of customer AI models on UiPath’s platform and the integration of external AI functionality on to its own platform.
UiPath announced 3 specific capabilities in addition to its integration service. These are Clipboard AI, Document Understanding and UiPath Wingman. The Clipboard feature uses AI to copy/paste content between different data sources by automatically categorizing and transforming the content so it is compatible with the format necessary to be used in the appropriate destination.
AskGPT is a feature which enables customers to use natural language to query any kind of document. And UiPath Wingman is for those of us who are non-technical and want to create an automation workflow using natural language and a drag-and-drop interface.
Are any of these show stoppers? It would be hard to imagine that any one of these offerings, or even all of these offerings together will dramatically move the growth needle for UiPath. Obviously, there is lots more to come in terms of new solution offerings utilizing the combination of AI with Robotic Process Automation. What I believe this kind of event, and these kinds of offering will do is to provide UiPath a gateway to the “C” suite where the interest in working with a software automation vendor with a deep AI offering will prove to be attractive.
Many observers believe that UiPath is going to endure pricing pressures and RPA will prove to be a transitional technology, with dollar expansion rates falling rapidly. Those were some of the kinds of issues which the company’s AI Summit was designed to address. Just for the record, while the presentations were informative, and specific, I doubt that the minds of many skeptics have were altered; the issue of Microsoft and its own flavor of large language models using ChatGPT remains-probably more of an overhang in the short term to the valuation of UiPath shares than as any real threat to its business.
UiPath is the leading company in the Robotic Process Automation (RPA) space. For readers unfamiliar with the technology, it is based on the use of software robots (bots) that can emulate human actions interacting with digital systems and software. If you use Microsoft Word, then you are experiencing the use of bots when the software completes a word or sentence by automatically enabling keystrokes. Bots are often use to extract data and operate on the data that is extracted. Inevitably bots are faster than humans at many tasks, they are typically more accurate, and they enhance worker satisfaction as mundane, repetitive jobs are automated. I have linked here to an easy to understand presentation that helps to illustrate what RPA is all about and how it is used.
RPA is often thought of as a foundational technology for digital transformation. Because it is software, the functionality enabled by bots ramps quickly and matches workload peaks and responds without demur to changes in workload requirements and specific demand spikes. It is typical that when RPA is introduced, manual errors are eliminated. The use of bots usually enhances compliance. Inevitably deploying bots enhances employee productivity, and winds up enhancing employee satisfaction.
Basically, bots wind up doing repetitive tasks such as logging into applications, moving files and folders, filing in forms. The more advanced bots can perform some cognitive process such as engaging in chats and conversation, understanding unstructured data and applying machine learning models to make some decisions.
RPA is not quite the same as AI, and that is one of the issues that some analysts have with their evaluations of UiPath and its competition. The reality is that RPA and AI are really better together when it comes to improving the performance of heretofore manual processes and repetitive workflows. The reality is the gold standard in automating tasks consists of inserting AI into applications built using bots so they are more productive and can perform additional tasks.
I think many readers will be familiar with chats that that are used by retailers, financial institutions, service departments, medical offices and countless other organizations that interface with us-consumers. It would be difficult to imagine ecommerce at the scale it has reached these days without chats even if some of us-count this writer amongst that cohort-who deplore the loss of human contact. But integrating AI into chats makes them work better, more quickly and enhances the overall consumer experience. While the use of RPA+AI to facilitate chats is perhaps the most familiar use case, the same technology is used to enable bots to understand documents such as forms submitted for credit applications and to enable bots to understand screens. It is said by some observers that “RPA can serve as AI’s last-mile delivery system.”
It is undeniable that UiPath has been through a period of substantially underperforming expectations. The temptation is great to ascribe some or all of this underperformance to competitive issues, particularly when competitors include companies such as Microsoft and even IBM. And it is hard to gainsay the fact that Microsoft’s partnership with OpenAI is leading and will lead to technology advantages. But this is not a case of one competitor dominating the market and sucking the life out of the other participants in the space. I have linked here to the latest Gartner evaluation of the specific competition between Microsoft and UiPath. And I have also linked to a more global evaluation of the other competitors in the space. Finally, here is a very specific evaluation of the two tools from a knowledgeable industry consultant, SphereGen.
Summary of RPA Comparison
Microsoft Power Automate is a powerful automation tool that is quickly becoming more diverse in its offerings for business user functionality. There are some key areas in which Power Automate does not offer the same level of opportunity as UiPath:
• UI mapping is still based on the use of connectors which is not as flexible as UiPath’s AI-based screen selector when automating screen flows.• Error logging is handled in subflows, outside of the automation script making debugging for developers more complicated. UiPath’s error handling is in-built.• Power Automate works best with Azure; UiPath is cloud-agnostic.• Power Automate is meant to be a tool for highly technical business end users. The UI looks intuitive, however coding the automation to completion still requires technical skills which are typically developer level. Developers are definitely needed for more complex automations.
There have been concerns expressed amongst some analysts and holders that because of Microsoft’s partnership with OpenAI, it will overtake UiPath and become a dominant factor in this space. Needless to say, I can’t prove a negative in advance. I like Microsoft shares and have recommended them on these pages, and I like its partnership with OpenAI. Microsoft shares are in the model portfolio I recommend to Ticker Target subscribers. I have recently written about how the partnership with OpenAI, while certainly no panacea, will be a noticeable growth tailwind. But that does not mean, and will not mean that UiPath can’t thrive and successfully compete against Microsoft. Many, many times in the past, some analysts and investors have believed that the entry of Microsoft into a market doomed the competitors. Note recently, Microsoft’s foray with PowerBI. Note how the competition between Teams and Slack/Salesforce (CRM) has actually played out. It is as likely as anything else, that the entrance of Microsoft into this market, however it is defined, might precipitate a sale of UiPath at a decent premium.
Many VC’s initially believed that there was no way that a company led by a Romanian entrepreneur and with Romanian development personnel could successfully compete in the RPA market as it existed in the middle of the last decade. The record speaks otherwise.
I think I can say that UiPath is focused on the extensibility of its platform and on incorporating useful AI functionality in an accelerated fashion. I think that when UiPath was valued in whatever sphere is beyond the stratosphere, it was necessary to believe that the company would be alone in the RPA space to justify that valuation. That wasn’t true at the time of the IPO, and it isn’t true today. But this is a very large market, and AI is making larger still, and there will be multiple successful competitors, and I believe that UiPath will be a big winner over time.
UiPath’s Business Model-Two layoffs done and one to go: margins are becoming healthy
UiPath was founded by Daniel Dines. Much of his pre-UiPath experience was at Microsoft. His passion is development. His expertise was not and is not the day to day tasks of either selling or managing a high-growth IT business. The fact is that PATH over hired over the past few years, and it is now beginning to adjust its expenses to a level that can lead to sustained margins and free cashflow.
Last quarter the company’s non-GAAP gross margin was 87%, essentially unchanged from year earlier levels. Software gross margins reached 92%. That is probably as high as gross margins will reach.
UiPath has traditional software pricing plans, with a freemium model, and two paid tiers. Its pricing is not based on usage and it is not really based on seats either. Its enterprise plan does include 100 Automation Express licenses. There has been no significant pricing pressure.
The company’s net retention ratio, after having fallen through most of the year, stabilized on a constant currency basis at 129%. Obviously, if the company can maintain its retention ratio at current levels, it is highly likely the company will exceed the revenue growth forecast it has provided.
Last quarter, sales and marketing expense was 41% of revenues, or $126 million. That is down by 4% from year earlier levels, when the expense ratio was 45%. On a sequential basis, sales and marketing grew by less than 2%. Research and development expense last quarter was 17% of revenues, compared to 14% of revenues in the year earlier period. Sequentially, R&D expense rose by more than 20%. A significant proportion of UiPath’s development is done in Romania, the country in which it was founded, although it is now headquartered in New York City. Not terribly surprisingly, overall costs for developers in Romania are far lower than they are in the US, although over time, that gap is likely to lessen. Part of the reason for the company’s far lower R&D ratio than might be considered normal for a company of its size relates to this geographic advantage.
General and administrative expense last quarter was 7% of revenue down from 15% of revenues the prior year. Sequentially, G&A expense fell by almost 50%. That is one of the steepest falls in the general and administrative expense ratio I have ever seen, mainly a function of the company’s latest layoff, the second to have taken place in calendar year 2022.
As mentioned earlier, overall non-GAAP operating margins last quarter reached 22%, up from 14% in the year earlier period, and up from 7% in the prior sequential quarter. For the full year, non-GAAP operating margins were 6%. The company is forecasting that non-GAAP operating margins will increase by 350 basis points in the current fiscal year. I would be surprised if actual results didn’t surpass that forecast. The company is forecasting that non-GAAP operating margins will start the year at around 2%, which compares to a non-GAAP operating loss margin of 4% reported in the year-earlier period. As mentioned earlier, the CFO did indicate that current estimates have more than a normal amount of buffer to account for the current macroeconomic headwinds.
Encouragingly, the company reported very strong operating cashflow for fiscal Q4. Free cash flow, adjusted for the one-time expenses connected with the latest layoff was $101 million, or a margin of 33%. There were various components to this performance; the standout metric was the significant increase in deferred revenues. Deferred revenues rose by $106 million last quarter compared to $59 million in the year earlier period. The company is forecasting a free cash flow margin of 8%, compared to breakeven free cash flow results reported for fiscal 2023 and it is forecasting positive free cash flow generation in every quarter of the current fiscal year.
As mentioned, this is a conservative forecast. The company is forecasting net new ARR this year of $225 million compared to net new ARR of $279 million last year. As the other numbers in the forecast key off net new ARR, forecasting that kind of decrease significantly de-risks the forecast and can allow for significant upside. The CFO commented that there was an expectation for some of the sales force changes to create some tailwinds in terms of sales performance by the end of the fiscal year.
UiPath does use stock based comp. Last quarter, stock based comp was $98 million or 32% of revenue. The year on year comparison isn’t really meaningful because it reflects the Black-Scholes methodology for recognizing vesting. Stock based comp. expense was $80 million or 30% of revenue the prior quarter. Management indicated that it would focus on reducing stock based comp expense going forward.
I look at dilution as the real cost of stock based comp. last quarter, outstanding shares rose by 0.6% sequentially, or around 2.5% on an annual basis. I used that level of increase in the weighted share count embedded in my valuation analysis.
It would be hard to miss the recent signs of economic slowdown. The ability of this company to maintain its forecast in such an environment and to forecast stronger growth over the coming quarters as its sales force transformation takes hold should be a positive in any evaluation of UiPath.
Wrapping-Up – Does UiPath tick the necessary boxes to support a purchase recommendation?
Investors have been clamoring to participate in what is seen by many as the AI revolution for some months now. Their search has led them to many companies, both good and bad, with various positions in the generative AI space. Count me as a believer in the transformative potential of generative AI in many spheres of life and in the IT space, particularly. And count me as recommending an investment in UiPath as one way of playing the AI revolution.
Just more than a year ago, UiPath started to run into demand and sales execution issues. Previously its shares had been excessively valued; they have fallen substantially, and no longer have a growth premium. PATH is the leader in what is called Robotic Process Automation. RPA is not generative AI. But the combination of AI and RPA provides users with solutions that deliver substantial productivity gains and lead to better user experiences. Some of those solutions were presented at the company’s recently held AI Summit. PATH has been a leading developer of solutions combining AI and RPS and some of its initial solutions are now on the market and more will be coming in the next several quarters.
The company’s results last quarter showed significant over-attainment compared to its previous forecast. That said, due to macro conditions, and increasing conservatism, the company maintained its forecast for revenue growth for this current fiscal year, although its forecast for non-GAAP EPS and free cash flow were well greater than the prior consensus.
More than a few analysts are concerned about competition from Microsoft, and in particular how its partnership with OpenAI will enhance the competitive positioning of that company’s Power Automate. There are some who believe that RPA will be a dead end technology, with the world moving rapidly to pure AI automation solutions. My own take is that UiPath has been developing products that incorporate RPA and AI together for some time now, and that it will be a beneficiary and not a loser, as the AI revolution takes shape with specific deliverables for wide swathes of IT users-and many other consumers as well. Of course, proving that in advance is not really possible.
In the wake of several disappointing quarters before the last two, analysts are fairly unimpressed with the shares, and 1st Call depicts a weighted average rating of well below average. That really didn’t change after the latest quarter, which in a different environment could well have been classified as a blowout. The result of that is some fairly attractive valuation metrics. In particular, the EV/S ratio is now 7X-once upon a time it had been greater than 30X.
It is difficult to establish a credible longer term CAGR for Path. The company is forecasting 19% revenue growth for the current year, clearly constrained by macro headwinds, and not yet entirely reflecting a significant sales force reorganizations. I have chosen to use a 3 year CAGR estimate of 26%, mainly because while growth recrudescence is more than likely emerging from current macro headwinds, just how much that recrudescence might be is anyone’s guess. I think 26% is highly conservative, but also far better than the revenue growth reported the last couple of quarters.
The company’s pivot to non-GAAP profitability and free cash flow generation is more visible, and less speculative. Indeed, the 33% adjusted free cash margin last quarter, was not only a record for the company, but also amongst the top such margins in the overall IT space.
I initially started to write this article as part of a commentary on the company’s recently held AI Summit. The summit, while showcasing some of PATH’s AI technology and the value of combining AI and RPA is not likely to change anyone’s mind about how competition between PATH and Microsoft might evolve and if RPA is an interim technology. I have expressed my view that PATH’s strategy is a winning one, and one which will lead to stronger growth as the economy eventually recovers from the pain inflicted by Fed policies. On that basis, I recommend the shares to investors with a longer-term time horizon.