Thanks, everybody. Welcome. Delighted to be welcoming UiPath to the conference. We're very fortunate to have co-CEO Rob Enslin join us. Thank you, Rob, for being here.
Thanks, Brad.
Looking forward to the discussion. I've got some questions that I'll go through, and we'll leave some time here at the end. If you have any questions, we'll give you an opportunity to ask. Just feel free to raise your hand. With that, Rob.
Good to-
Great to have you here. Thanks again.
Thank you. Let's have some fun.
Absolutely. coming off of a nice Q1, curious to get your perspective on what were some of the key highlights, what's been the investor feedback, since then?
Yeah, thanks, Brad. I would say, you know, it was the... We had good return on operating income.
Mm-hmm
I think we continue to make significant progress in that space, and the investors are pretty happy.
Mm-hmm
to see some free cash flow.
Mm-hmm
... coming through into the company, and we continue to commit to a disciplined approach.
Yep
around that.
Yep.
Our segmentation, you know, the changes we made to the sales organization, which we announced in September of last year, is starting to.
Mm-hmm
starting to come through. We feel really good about.
Mm-hmm
some of the leadership we brought in, some of the work we've done around making certain that the platform actually plays a big part.
Yep.
North Star. North Star is coming through as well with customers. Our North Star is our value platform, where we actually go into the board of how we really help companies drive super efficiencies and get significant benefits from the solution.
Mm-hmm.
I think the SAP partnership was kind of a highlight as well.
Yep.
... in our Q1 earnings. Why don't I bring it up for a change, because I seem to get this question a lot. The discussion around generative AI was, you know, at the forefront of our earnings, and we actually showcased a live demo.
Mm-hmm
... in earnings of something we call Project Wingman, which is really using generative AI to actually produce automations on the fly, basically.
Mm-hmm.
Um-
Mm-hmm
which was actually really well.
Yeah.
I think people were surprised, but, I think.
Yeah
... enjoyed seeing something.
Yeah
... instead of another announcement, something that was-
Right
... real and tangible and, something that's in the works already.
Sure
... at UiPath.
Since you mentioned it, the SAP partnership was front and center. If you could elaborate on there, on that, what was the reception at the conference?
For those who know me, I spent 27 years at SAP, so going to do a keynote back at SAP was kind of, deja vu, I guess.
Yep.
That's probably the best way to describe it. It's weird. I think I must be the only board member that's ever gone back to do a keynote in a company that he was on the board of. It was actually, it was awesome, actually. You know, I had an opportunity to witness the partnership live with a customer, Adidas, who actually showcased how their SAP S/4 environment, together with automation, added significant value to Adidas. They gave some statistics. I actually didn't bring it with me. I don't have the facts with me, but they had some statistics, and they have over 1,200 hours of automation running inside the SAP system, which means manpower and things. Seeing some really unbelievable returns.
Mm-hmm
... for them.
Mm-hmm.
That was really a showcase of why this partnership matters, why customers should care.
Mm-hmm.
There was a lot of excitement from the SAP sales organization in driving this partnership forward because, one is they're gonna get paid for bringing it in. Second is, you know, customers really, are excited about it because they've invested a significant amount in SAP...
Mm-hmm
and the processes, and now they can see how they can add more innovation on top using the combination of the workflows that SAP have, together with our automation-.
Mm-hmm
... and connecting it to Test Suite. It's a significant opportunity for everyone.
It's exciting. Great to hear. Thank you for that. Guidance for this year, and we'll just get into one of the metrics, ARR growth to decelerate by the end of the year to 19%. You just put up 28% growth this quarter. Would love to get your thoughts on kind of what's assumed there, you know, from the macro standpoint, execution, you know, for that type of detail.
Yeah.
Yeah, please.
The way I look at it is, look, and we've laid out the guidance, and we committed to the guidance. You know, we continue to see variability in the marketplace, and we've been clear about that for some time.
Mm-hmm
We made significant changes to the sales organization, bringing new leadership, segmentation...
Mm-hmm
... and stuff. It's probably taking a little bit longer to embed-
Mm-hmm
into than we'd hoped.
Okay. Yep.
We feel really good that it, you know, it's gonna continue to accelerate in the back half of the year. We'll accelerate in the back half of the year.
Mm-hmm.
The things that we're putting in place, SAP, partnership. In Europe, the T-Systems partnership is gonna be big. Our solution accelerators...
Mm-hmm
... are significant. We launched the SAP Heatmap with Test Suite to articulate where you can actually find automations in SAP. They're all things.
Mm-hmm.
We feel like all the pieces we put in place around the-.
Mm-hmm
... segmentation model is gonna have a significant.
Mm-hmm, mm-hmm
... benefit in the back half of the year. Remember, like, more focused on Global 2000 than we've been, you know, we're working with companies over a longer period of time, we'll have significantly larger opportunities...
Mm-hmm
with those companies.
Mm-hmm.
That just takes a little bit more time to bear down, and we feel good about the back half of the year, for sure.
Great. Maybe, if you could help us understand the level of partnership here with SAP. I mean, are there, you know, joint go-to-market resources that you have? Are there salespeople with quotas here? It sounds promising, so just any detail?
Yeah. There's a couple of pieces to the partnership. One is, we built something called Endorsed Applications.
Mm-hmm.
Basically, it's a, it's a SKU.
Mm-hmm
that is specific for SAP customers.
Okay.
The SAP sales reps and our sales reps will be selling that SKU, and they'll both be compensated on it.
Okay.
There's marketing arrangements, where we will actually have dedicated people in the field. We actually already have dedicated people in the field.
Okay
We've made some significant hires around that.
Okay
in every single market. We are already on the marketplace.
Mm-hmm.
As of. We're in June, right? Now we're in June, right?
Mm-hmm.
I think June 1.
Yep.
I can't remember. Like, I think the beginning of the week or earlier or late last week, we're on the marketplace. We already starting to see pipeline come into that, and we have engineers working together-
Yeah
-to build out the product sets and the connectors-
Mm-hmm
specifically with their Signavio product.
Mm-hmm.
How that fits into our solution, so the customers see it from a holistic point of view. Ultimately, our goal is to make certain that those products are fully integrated into each other seamlessly.
Great. You alluded to this a little bit earlier on some go-to-market changes. I think in Q1, there was quite a bit of that underway. Could you just elaborate on that? You know, where are we with that? Is some of the disruption that you saw, that you alluded to in the past?
Yeah. We're done with it.
Okay.
We're done with the changes. We are now focused on embedding the relationships, making certain the customer relationships are more meaningful. It takes them more time to get new sales reps into new customers to make certain that they're connected. That's embedded. The changes that we needed to make, they've been made.
Mm-hmm.
The changes of the partners have been made.
Mm-hmm.
I would say we passed that now it's about execution.
Yep.
Making certain we can execute against that model, making certain that the platform is at the forefront of that model.
Mm-hmm
-piece that we said we would get scales globally and is scaling.
Mm-hmm
-through our partners. We feel great about where it's a matter of execution.
Okay.
We also feel good that we actually have the right resources in place globally, and we're actually bringing out the right types of solutions for customers. I was asked the question early on, which solution set, is it RPA that's driving the platform and that? We got significant solution sets in the platform like Document Understanding, Communications Mining, Test Suite, which in many cases is driving that. Those require, you know, a bit of a higher level sales motion than pure RPA.
Mm-hmm.
We're starting to see some significant opportunities in that space. You know, we mentioned previously Aera, we've mentioned Bank of New York Mellon, we mentioned HCA, I think we mentioned Pfizer. These are all driven by these products, like Process Mining, Document Understanding, and so on.
Wonderful. Great. A lot of debate across software as to, you know, which categories is AI additive to, which ones is it deflationary? How do you think about that for RPA, and how should we be thinking about the AI opportunity, you know, and where might there be some deflationary?
It's certainly on the forefront of everybody's tongues. Even at breakfast this morning, I was like, I tried to shut out the two tables next to me, where I was just like, everybody's talking about generative AI.
Yeah.
Like, isn't it? Just talk about scrambled eggs for a change. I mean. It is the topic du jour of the day. I would say we benefit from it, you know, because we've always been focused on AI, not generative AI, but we've been focused on AI. If you look at Computer Vision, the work we've done with Computer Vision, to understand how people interact with screens and things. This has allowed us to collect that data, understand that in meaningful ways that allow us to do things and create a little bit of a moat around the RPA for certain. We've also got other solution sets in AI.
Our Re:infer acquisition, which we call Communications Mining, is largely NLP-driven, natural language process, with built on the Google Cloud platform, with active learning built into it.
Mm-hmm
being the ability to actually, interpret emails, understand emails, be able to take contextual pieces of the email, and then be able to understand how to repurpose and rewrite something back in the language that you were written for.
Mm-hmm.
We've got a lot of that kind of technology. We launched, for those that were at FORWARD 5, FORWARD 5 being the fifth forward we've done in Vegas last year in September. We showcased ChatGPT, not ChatGPT, Clipboard AI. When we showcased that, I mean, that was built on GPT-3, but, you know, if we had launched it and said, "Here's GPT-3," everybody would say: "What are they talking about?" Right? We've been showcasing a little bit of OpenAI's technology early on.
Right.
That product comes to market in October.
Okay
in productive.
Okay.
The product we showed, we showcased some work we're doing in the earnings call around GPT-3 and GPT-4 with Jarvis and Wingman, and we've got something called Jarvis in the works, and we're working with customers on use cases so that they can use our automation with some generative AI technology. We've kinda built a methodology to build real showcases. We feel like we get tailwind out of it.
Sure.
We feel we've got real good capabilities on the engineering side, really good understanding, from a research side. Our research is largely run by Professor David Barber.
Mm-hmm
... who runs the UCL in London. He's the head of.
Mm-hmm
-there on the research side. We feel like we've got really good capabilities in this space. We feel like we've got really good talent in the space. We've been doing it for a long time. We feel like this accelerates opportunity in this space, and we actually really focus on bringing out more and more product now in this space as well.
Wonderful. What has the impact been since all the attention on AI, you know, beginning of this year, end of last year? Has that changed at all your kind of velocity in the pipeline, if you will, or deal sizes or anything of that nature? I mean, what impact has this had on the business? You know, with this attention amongst CIOs and lines of business-
Yeah
that are adopting RPA?
When you're talking, first, when you look at this, you know, many boards now are going through a process to try to understand how does this impact their company or how can it impact their company? How do they utilize it? Are they going to miss out on opportunities and so on? In our case, we added on to the discussion around the platform and why the platform is important, having the right baseline-
Mm-hmm
... around, you know, transaction systems, how you understand automation. You know, it's not only AI, it's API, it's UI. The combination of all of these are important. You have to have Integration Services-.
Mm-hmm
... included if you truly want to add generative AI on top of it.
Mm-hmm.
You know, order is going to be an order. Generative AI can't create an order if it doesn't understand how to create it.
Mm-hmm.
Right? Those kind of pieces are really important. The discussions we have is how do we help you drive, these business processes, these systems, to a different level, utilizing our platform?
Mm-hmm.
On top of it, how do we scale certain cases where you've got information, where you want to...
Mm-hmm
... your LLM model, proprietary version?
Mm-hmm.
Right. How do we use some of our tools to actually build it on top of automation?
Mm-hmm.
That conversation now, I would say, is happening actually across all aspects of the C-suite. Certainly, the CIO.
Yeah
... to come up with a plan, come up with how it's going to impact it. The CFO wants to understand how can they utilize.
Yeah
... the company in general wants to understand it. You know, we're benefiting from it right now, because we actually are able to actually take it to the case of, let's build something with you.
Right.
Let's build a use case on top of the existing platform we have.
Right
let's scale that up.
Right. Okay, great. you know, there's always an analogy here to RPA as kind of that 11th mile, if you will, beyond what system-to-system integration can accomplish. System-to-system integration can only accomplish so much. Beyond that, you need, you know... There's some human intervention, some manual processes involved.
Yeah.
Processes involved. Where do you think of that, you know, line falling between, you know, system-to-system integration and where RPA picks up? Do you see the limitations there of system-to-system integration, such that this is an ongoing need for that? Do you see that as improving over time?
I might see it a little different than most. having been an engineer, in my prior lifetime, and having built APIs, you know, every cloud product needs to be API-driven, and every cloud product today is API-driven. If you go back a little further, that's not actually 100% accurate.
Mm-hmm.
If you go back into the early 90s and 80s, you know, you generally don't have any kind of real technology you can utilize.
Mm-hmm.
If you really want to make a difference in automation, you have to be AI-driven, you have to be UI-driven, and you have to be API-driven. If when you think about how we build automations if you do not take the user or the consumer or the person into account when building system to system, you're only going to get 10% or 20% of the answer to your problem. If you're in sales, if you're a head of sales, the biggest challenge you have is how do you make certain your salespeople are most productive?
Mm-hmm.
It's pretty easy to get the system-to-system stuff working. The piece that's going to be really slow or cumbersome or where you need to really get productivity is with the human.
Mm-hmm.
You absolutely need a combination of both to be, to make substantial progress. I think if you only focus on system to system, you'll get Process Mining type understanding, but you're not going to be able to solve the really big-
Yeah
... the really big implication. I think it's going to be a bigger challenge when you're using GPT as well.
Mm-hmm
because GPT really helps accelerate the user piece as well.
Mm-hmm.
We actually have inside our UiPath Business Platform, we have something called Integration Service, where we actually connect to over 240 systems, fully content. We use it for Test Mining. We use it to actually build the automations on the fly.
Mm-hmm.
You can connect to Salesforce, SAP, Oracle, Workday, and so on.
Mm-hmm.
You can connect the human, and the human doesn't have to know how-
Sure
... we don't separate system to system or API to API.
Mm-hmm
... to the human, because we actually want it, we want that included in it. An actual fact with Communications Mining-
Yeah.
That's the Re:infer acquisition. Communications Mining, we also do the same with emails.
Mm-hmm.
We actually automatically can understand an email that's an invoice number or that's a customer,
Mm-hmm
... number. We can go into in a Salesforce system and see, is it validated? All automatically inbuilt into the automation.
Mm-hmm.
So-
Yeah
... for me, it's not RPA, there's only one or system's the only answer. I think if you don't answer the full spectrum, you're not going to really solve.
Sure
... the problems you have to solve.
Sure. Great. Thanks, Rob. Since coming in as co-CEO over a year ago, what have been some of the key focus areas for you? Now looking back over a year later, what are some of the successes? What are some of the areas that you're, you know, still working on here?
Yeah. I feel, coming in over a year ago, you know, I, I viewed that UiPath had a unique opportunity to build a category for automation. Automation for me covers the how to discover what I want to automate, how do I understand which processes, human beings, how they interact with the system? How do I make certain that I can really understand that, so I know where I can, where I can build automations to provide unique capabilities back to the company at speed, really fast, and so on. You know, I think we've done a really good job positioning UiPath as more than RPA, and that it's a platform piece.
Mm-hmm.
We have, we've got now some significant wins in that space. We are relevant in customer conversations, C-level executives. We held a summit, a C-level summit, that we actually had to stop folks coming to.
Mm-hmm.
We had too many attendees. When I say C-level, CIOs and CEOs attended.
Mm-hmm
... the event, and I feel like that's lifted us out of just pure CoEs and RPA in a big way.
Mm-hmm.
I view we've handled the macroeconomic state that we actually have over the last 12 months really well, and weathered it well compared to our pure competitors in that space.
Yeah
... because we focused on driving value for customers and efficiencies, and I think that'll absolutely continue.
Mm-hmm.
I feel really good about that we have a model in place that the investments we're making are actually paying, and we're actually able to drive it at a profitable level and a highly efficient model, and that'll continue to scale over time.
Mm-hmm.
We've got the right balance between how we invest and how we focus on margin.
Mm-hmm. Mm-hmm.
We've been clear that, you know, we'll continue to focus on driving to a Rule of 40.
Yep.
Right?
Yep.
We've made progress in terms of the margin, as I said early on, and we'll get back to growth in the back half.
Mm-hmm
... back half of the year. I think those are all things that, you know, are really good, and I feel like the company continues to be relevant for customers, and that's really important in this market.
Wonderful. Thank you for that. There, you know, there's been a bit of a pivot back towards expand, you know, I think land versus expand. Coming out of the IPO, you know, the focus was more on the expand motion.
Yeah.
Like, you have those big enterprise customers and the focus was more on selling into the base. I think now you're kind of back to more balanced land and expand. If you could just elaborate on kind of where you are there and where's the focus? Also, you know, you talked about that, some of the reorganization earlier this year, but what has changed about the go-to-market, just generally, you know, How is that?
Yeah. Maybe that's kind of in the same context, right? I mean, the couple of basics around the segmentation was getting higher density with larger companies. In other words, having more people focused on the larger companies so we can expand faster into those companies, and expand the revenue streams much quicker...
Mm-hmm
We can mature the customer base.
Mm-hmm.
Which first, it felt like we needed to help customers drive automation faster inside the organization.
Mm-hmm.
In order to do that, we needed to be more relevant with the C-level.
Mm-hmm.
we actually changed the segmentation from a quota carrier having up to 80 accounts, 8 0, to 10 to 12 accounts. now we're having deeper relationships, much more deeper, because we've also gone by industry a little bit.
Mm-hmm.
We've driven it by industry. Now we can actually really solve really problems by industry, by environment. We've actually kind of expanded our footprint around what we call managed service providers. There are companies that can't really focus on the full platform.
Mm-hmm.
We can actually build services. They can use the services with our partners and get the benefit of the full platform. Don't necessarily need the technical skills.
Mm-hmm.
In the acquisition side, we've gone with our emerging industries, where they will continue to acquire net new customers. We didn't want to stop doing that.
Mm-hmm
...because, you know, RPA is a great place to acquire customers.
Mm-hmm.
Once you've acquired them, how do we quickly get them into an expansion model so we can? That also depends that we actually have to acquire the right customers, right?
Mm-hmm.
Doesn't mean that we actually say we're not gonna acquire a customer, but when we acquire a customer, we have to determine the propensity that that customer has to expand because they fit.
Mm-hmm
the business model around automation.
Mm-hmm.
If we get really good at that, then we'll actually acquire the right customer. We feel like that model is the absolutely the right model, and we've seen the benefits.
Mm-hmm
of that model. Where we have those close relationships now, because then things like Document Understanding, Test Suite, become relevant because that person is now understanding how it connects to all pieces of their company.
Mm-hmm.
That's the biggest pieces of the go-to-market that we put in place. Obviously, we had a higher talent that actually could actually, you know, connect with C-level executives, understood how business processes work, understood how automation can benefit the companies, and we've put that in place globally. When you look at the leadership now in Europe and in Asia, Mark Gibbs has been there probably 7 or 8 months now.
Mm-hmm.
Lee Hawksley has been there 5, 9 months. We've got Ryan Tang, emerging markets. We feel really good that we've got the right talent in the business to actually scale it.
Great. Maybe back to partnerships. You touched on SAP a bit, Snowflake, AWS.
Yeah.
There's a relationship there, if you could elaborate on those. Also, where's the focus on the SI channel? I know that's a.
We've done a lot of focus on the SI channel. I'll start there, and I'll come back.
Sure.
When you look at... I mean, when you look, we announced the Amazon SageMaker partnership. We just think that's, you know, the right thing to do with AWS, and we're doing quite a bit of work on the engineering side with Amazon SageMaker.
Yeah
With AWS.
Mm-hmm.
The same is true for Google, by the way. I mean, it's just not we didn't make a public announcement. The same is true for Google.
Yeah.
The same is true for Microsoft Azure and OpenAI.
Mm-hmm.
Snowflake, in particular, we are working with them to get around building out the manufacturing cloud and building automation on top of supply chain things. The customers that are using the manufacturing cloud can actually then benefit from our automation on top of that. That's how we're looking at the partnerships. We're also looking at these partnerships in terms of industry.
Mm-hmm.
Right? where they, these companies that are focused on particular industries or they have skill sets in industries, we can put the automation pieces together with them and add more value.
Mm-hmm.
in that, in that space.
Great.
I did not answer the question around the big SIs, though.
Yeah, yeah.
I was intending to start there, and I didn't.
I know it's a new focus, so that's why I asked.
Well, it's. Yeah, I think if you, I think we're making significant progress with companies like Accenture, Deloitte, PwC, EY. I mean, EY have been with UiPath for a long time. When, when, what does progress look like with this? When you look at, we're now included as part of many of their big transformation projects. I'm busy with a project in Australia right now with EY, with helping the company take out $1 billion of cost. We are an integral part of that, part of that.
Mm-hmm.
They're leading it. They're actually going through with the company, which processes they can not automate, which processes need to be worked on, how they need to change those processes.
Mm-hmm.
How does automation help the business drive through it. We're seeing more and more of those. With, you know, with Accenture, we're working more in financial services and insurance.
Mm-hmm.
in the insurance space, healthcare space with them. We're starting to see significant amount of traction in that space. By the way, the SAP partnership really helps.
Yeah.
Many of them have huge SAP practices. In one case, one of the partners has decided to combine the automation and SAP practice.
Mm-hmm.
because of the SAP partnership.
Mm-hmm.
They now want to actually drive that, their focus. The big global SI providers are doing significantly more business with us today.
Yep
than they have previously done. We're also doing some work with BPO. BPO continues to be an interesting opportunity...
Mm-hmm
in the automation space, probably more in the RPA space than-
Mm-hmm
-in test mining and Document Understanding and those kind of solution sets.
Sure. Thank you, Rob. We'll see if there are any questions from the audience. If you do, please raise your hand, and we'll get a mic over to you. We've got a few minutes here. If not, I'll keep going. Maybe just, you know, you talked about the platform. Can you elaborate on what that means exactly? How is UiPath a platform? You know, what are the components that make that up?
Yeah.
Yep. Yep.
The way we look at a platform, we look at it in three phases. We look at the discovery phase, we look at the automation phase, and we look in operations phase. Discovery phase basically says, "How can I go into a company and figure out how to help them drive more efficiencies in terms of their business processes, in how users interact with the system, how they interact with their customers, and so on? And how can I find unique pieces of information in that so that we can do it on a continuous basis?" In the automation, and that's in discovery, and that's what we call Process Mining, Task Mining, Communications Mining. We are the only company, software company, that has all three of those pieces-
Mm-hmm
together fully integrated into automation.
Mm-hmm.
In the automation phase, we have low-code, no-code, we have workflow, we have our products to build automations. We have something called Test Suite in there. Think Tricentis, right? Test Suite basically combines any kind of testing environments, regression testing, not only for UiPath, but for other products. We have, as I said earlier, we have over 240 integrations into other companies' products, including content to build. We're actually building some GPT technology into the Test Suite to create synthetic data and so on, so that you can drive it. It creates a closed loop around automation is really about the build piece. How do I build these automations? How to help customers build these automations.
Mm-hmm
whether it's citizen developer, whether it's analyst, or whether it's a professional consultant building out a new. In order to run it at scale in an enterprise, you need to have an operation. You need to have analytics to understand what automations have run, been run. Are they auditable? Can they be traceable? Did they run? Why didn't they run? When they break, how did they break? Who picked it up, or was a ticket created, and so on? Because you can't drive mission-critical systems at scale connected to SAP environments, to Oracle environments, to Salesforce environments if you're unable to determine. In many cases, you also connect to the logs, with the logs into Splunk and so on, so that you actually have security connections.
Mm-hmm
to it, Okta, Zscaler, and so on. Our automation platform covers all of those pieces. We can share a diagram with you. Then we ingest in many of those pieces, all the AI that I've been talking about, actually part of the technology platform. The piece that we don't showcase that much is the, we haven't showcased a lot in the platform, is the open part of the platform, which allows us to connect in Google Vision directly, AWS SageMaker, OpenAI, Microsoft Azure OpenAI, directly into the thing. We have with our Automation Cloud, we have the ability to actually have your large language models or models, ML models, that you want to create and store-
Mm-hmm, mm-hmm
... you can store inside of our UiPath Business Platform. I hope that gives you... It was exactly 2 minutes and 36 seconds... of our Platform.
Perfect.
I hope I did it justice.
Yeah. Right on the mark.
Yeah.
Rob, thank you so much.
Thank you.
Great to have you here. Great discussion.
Thank you, everybody.
Thanks.
Thank you. Thank you.
Good morning, everyone. Thank you for joining us here at, on day 2 of our, BFA Global Tech Conference. I'm Wamsi Mohan. I cover hardware here at BFA. super excited to have VIZIO with us today. We have the CFO, Adam Townsend. Adam, thank you so much for being here.
Yeah, great. Good to see you, and thanks for having us.
Yeah, no, absolutely. I guess, you know, to kick it off, right, maybe if you could just spend two minutes on really VIZIO, how it's positioned, where it's positioned, and sort of what are some of the trends you're seeing at the highest level, and then we can dive into questions.
Yes, absolutely. I could talk about this for a long time-
Yeah.
Cutting off at the 2-minute mark.
Yes.
Look, VIZIO's come a long way in its transformation of, from being just a hardware company to now being a hardware and a software with its proprietary operating system now in place. We're in 18 million homes on a monthly active user base perspective, it's really transformed our business model from really only making money when we sold a TV to now making money when people use that TV. That's just really a different position to be in the market. Because we have a fully integrated operating system with our hardware, we have the most robust ability to understand the user preferences, what they're engaging with. We have ad solutions for advertisers that can be very compelling and high ROI for them.
That puts us in a very strong position in the marketplace as advertisers are trying to figure out how do they reengage with viewers as they've moved out of linear TV and into more and more streaming. The eyeballs are moving, the dollars will follow. There's been some lag to that for a variety of reasons, but as we continue to educate the marketplace about what we can bring to them in terms of solutions, the value proposition to consumers, we are right in front of this massive secular shift that's underway in terms of viewership trends and the ad dollars that will follow.
We're focused on continuing to invest in creating a great product, great user experience, sourcing the content onto that platform that they can easily access, find, search, and discover using our home screen, which is a really important real estate in the home. It's very powerful for both content partners as well as ourselves to drive engagement into it, and we've spent the last several years building up an ad sales team, some ad tech capabilities that enhance our ability to monetize that engagement. Now we're looking at not only how do we grow households, but how do we deepen the engagement with the existing base?
As people are spending more and more time in streaming, we wanna drive them into using more and more ad-supported content where we can serve ads, but do it in a way that brings the great experience to them as well. Relevant ads are much more tolerable. People enjoy sort of relevant ads versus, you know, unreal, irrelevant ads, right?
Sure.
Everything that we're tooling around in terms of our software development, our engineering capabilities, is all designed to bring back to what I said, that great product, great viewing experience, great search and discovery, great engagement.
Yeah.
We feel like we have a strong hand. We're in the right place at the right time in terms of this massive shift that's underway, and we just have to keep our head down and keep executing.
Yeah. No, absolutely. That's a great summary. Maybe to kick it off here on, in terms of the competitive landscape, first, on the device side. You guys have, you know, known and been in the TV business for a long time. There are been some changes you've made over the course of time with ACR technology.
Mm-hmm.
Some other, you know, differentiated technology. As you look at the competitive landscape now, you've got, you know, Roku announcing a TV, you've got Amazon talking about TVs, you've got Apple with ski goggles. I mean, you've got sort of a lot of different options out there.
Yep.
How do you think about the competitive landscape and sort of the, both the pricing dynamic and the opportunity to increase penetration in households that'll eventually drive your user base, higher?
Yeah. VIZIO was launched in 2002 with a core principle of bringing great value to the consumer, and that continues to be our core operating principle today. That shows up in a variety of ways. It's not just price. We're not the price leader, per se. We're gonna be competitive. We're gonna have, you know, we're gonna be aggressive where it makes sense on pricing, but also bring a great quality to that price point so the overall value proposition is strong. That shows up in things like extending Wi-Fi 6 into our entire fleet, down to our entry-level units, which many of our competitors at that same entry-level product doesn't have that capability.
Sure.
We're willing to do that because we know it's so important to have a good experience for the consumer because it fits the rest of the business model. If someone's on a TV and the connectivity is weak, they're probably gonna stream less or not have a great experience.
Yeah
... or, maybe even go get some other solution. We don't want that to happen. We wanna bring that great value to the consumer.
Sure.
We're gonna continue to be at the value end of the spectrum. We think as the quality is there, and it's recognized, that there's opportunity for share gains, both from the bottom of the market, but also from the top. When people say, "Look, relative price and relative value here, I can get a great TV from VIZIO. Why am I paying more for some other brand?" We need to continue to keep establishing ourselves on that front. It drives the entire flywheel, the entire new, you know, kind of new platform business model.
Do you think that there's an opportunity internationally to grow the space?
There may be. I think right now our priorities are to focus on the opportunity in the U.S.. There's tremendous headroom for growth here in the U.S.. We've only been in this, CTV marketplace, in terms of even having our own internal ad sales team, for about 3 years, barely 3 years. It's early days for us. It's a very large market with all the right secular shift trends underway. We wanna stay focused and disciplined on this market. We know there's a lot of headroom to, our ARPU opportunity.
Yeah.
We've grown that significantly over the last several years. We're now at roughly a $30 ARPU. We know some in the market are north of $40. We're looking to how do we close that gap as quickly as possible, actually look to surpass that. We think being in the U.S. only is the most monetizable marketplace for what we're doing. It gets diluted when you get outside of the U.S. You have to be very thoughtful about what markets make sense and the cost to enter those markets. For us right now, in terms of the runway we have ahead of us for U.S. to drive higher ARPU, to drive more growth. Like I said, we're an 18 million monthly active users. We want that to be much larger.
There are, you know, U.S. households, about 55% have a fully integrated Smart TV today, so there's a growth opportunity there. If we play in front of all of these individual growth opportunities, it collectively, it creates tremendous potential for us.
Where do you think that this active user base can go over the next couple of years?
Look, we've been growing it steadily, for the last several years. I think there's room to go there. When you think about the total U.S. households, then you sort of look at shares across that. That's why it's important that we have a product that can gain share from both the top of the market.
Yeah
and the bottom of the market. That'll expand our opportunity to grow the overall install base. We're focused on that. We're gonna keep pushing to have a great product that increases the probability that someone chooses a VIZIO when they go into a store. They have a great user experience, and word of mouth is very powerful, right? People have a great experience, they talk about it. That's what we're focused on. I don't know, you know, where that will shake out yet, but we know there's plenty of room from 18 to where we can be.
Okay, perfect. maybe pivoting now to the Platform Plus side of things. What are you seeing in terms of ad spend in the scatter ad market, and what verticals seem to be coming back versus not?
Yeah, look, we're quite pleased. I mean, I think you saw in the first quarter, we reported 24% year-over-year growth in our advertising business.
Yeah.
That outpaced our closest peers, based on the data that we looked at out there. We think the CTV market in general grew about 20%, and we, like I said, grew 24%. We believe CTV is the part of the market that's growing in overall advertising, and we're gaining share within that growing ecosystem. Not true necessarily for traditional, you know, legacy media companies.
Sure.
You're seeing a very different dynamic occur there. Again, back to the theme that we're in the right spot at the right time, I think that reinforces that further. On our first quarter call, we said that ad trends were actually accelerating so far at that point in Q2, and that has continued now, here throughout the quarter. We're pretty deep in the quarter now, and we're very pleased with the trends there.
Excellent.
In terms of where our outlook is, we feel very confident that we're gonna be able to put up good numbers against that.
Fantastic.
To the category point, though, I wanna make sure. These are the big TV categories that are coming in now, and now that we're more established, they're comfortable with us, and they're putting dollars to work with us. Our biggest growth is right now in telco, pharma, quick-service restaurants. CPG has actually been quite strong. Financial services. These are the big TV categories, and that's exactly where we're seeing that same kind of growth from them. Part of it was getting on their radar, part of it's becoming part of their planning process, and then seeing those executions come our way.
Can you give us some sense of like, you know, how that has changed on a year-on-year basis, like, you know, because obviously you guys have a more dominant presence now than you had last year?
Yeah. From a category standpoint, I think a year ago, we were sort of in all the categories. Now, we have multi-brands within categories. We've actually grown our ad sales team to have more scale and capacity to have dedicated reps, you know, focused on particular categories.
Yeah.
That just gives us an opportunity to be in front of them more, to deepen those relationships and bring bigger ad campaigns to us. We just, we need more volume, more users in ad-supported content so we can do bigger and bigger campaigns. You're seeing, you know, triple-digit growth across those major categories: telco, pharma, financial services. The exact point of they are large categories, we've become more established. We're bigger than we used to be. We're now a scaled alternative in CTV. You don't have to just go to one or two outlets, we're now in the field, I think that that's actually bringing more dollars. What we see is advertisers will come to us, they'll dabble a bit, and then they'll increase their spend with us over time.
Mm.
We track, you know, how much recurring revenue we have from those clients, how much business is coming back our way, and what those dollars look like. To be able to drive triple-digit growth across very large advertisers in marketplace is pretty fantastic.
Yeah. No, that's very compelling. Well, how is engagement trading on Platform+?
Quite good. I mean, I think we had some great stats in our first quarter, and it's something I track very closely because it's not just... I know you asked about the size of the install base-
Yeah
It's the quality of that install base as well. We are seeing an increase in time spent, in a streaming environment as a portion of total time on the TV. We track both those metrics.
Yeah.
Time spent in streaming reached a record high in Q1 at 54% of the time. That's great for us 'cause that's putting them right in the place where we can monetize them the best. We look at it on an aggregate basis, so total hours served. That tells us the scale of our servable impression volumes, but also at a per active user basis, and we're seeing an uptick there as well. I think, you know, we went through a dynamic around the pandemic, where there was a big lift in streaming because there were a few alternatives for content.
Sure.
It had to ease off as live sports came back and regular programming came back, and now it's continuing that longer-term secular shift that I'm talking about. For us to be hitting a record high in terms of time spent in streaming this first quarter, just validates that that upward trajectory is underway.
How are you thinking about sort of, you know, SmartCast hours? I mean, clearly, people are out and about a lot more. Is this a trajectory that you think can sustain growth off of these levels? What kind of growth do you think is reasonable?
Yeah. Look, we do. We think that when people move into streaming, they don't necessarily go back, right? There may be specific reasons, like live sports or things of that nature.
Sure
Even more live sports are coming to streaming platforms.
Yeah.
You see what Amazon-
Yes
is doing and others. I think it just keeps reinforcing that streaming is the distribution model of the future. Of course, there'll be a long tail of people who stay in traditional. I mean.
Sure
... loyal to their set-top boxes.
Yeah.
In general, I think the population is moving in that direction, and that is a tailwind to where we're positioned. We're looking for continued growth, and it goes back. The onus is on us. Create a great experience, source the right content, use our data to inform us about what content to source. If we understand that part of our population over-indexes in a certain genre, make sure you've got that content for them. Promote that you have that content. Again, increase the probability that they engage with it.
Yeah.
Great for them, great for us.
Yeah, absolutely. Can you talk about how the NewF ronts and upfronts are going for you this year?
Yeah, we're really encouraged. We had a great. This was sort of our third year of really presenting in the NewF ront process. Our first year, a couple of years ago, we did about $100 million in commitments. Last year, we announced that we did over $200 million in commitments. I'm not ready to predict this year's number, but I'm willing to bet that it will be nicely above last year's number.
Okay.
By just anecdotal evidence of the awareness of VIZIO in the marketplace. We had our upfront, our NNewF ront presentation in New York a few weeks ago. Standing room only, big attendance, even more people watched it virtually. The awareness that VIZIO is a destination to reach viewers has gone up significantly in the last couple of years, and so I think that alone lends for more dollar commitments our way.
That's really impressive. Adam, you mentioned before ARPU about $30. You know, that some of the peers are getting, like, much higher. What are some of the specific drivers that you can sort of point to that get your ARPU, like, meaningfully higher?
Look, I think it's really just time and market on a variety of things, right? I mean, like I said here, the newness of us in the ad market, just more demand creates more, and as we have more scale and more time spent, as we're that user proposition...
Yeah
is working, that increases the ability to drive ad dollars. There's demand for our data in market, for us to be able to add products, analytics, services around that, increases opportunity to monetize data. That's another source. We're very early in the subscription or the SVOD monetization piece. We launched our VIZIO Account about a year ago, this summer, late summer. We've got to ramp that up in terms of people's awareness, that this is a great way to manage all of your SVOD services in one spot, turn them on, turn them off, but we monetize, and we have relationships with all the major services to be able to monetize that. We were just later to come to that.
Sure.
We're there now.
Yeah
That's another place to increase it. The other one that people don't think about a lot is our opportunity to monetize off device.
Mm.
We get really focused on what's the install base and what's the ability to extract from that install base, but we have technology now that allows us to monetize across other platforms, off device into mobile inventory, using a lot of the same data and capabilities to make that an audience reach or audience extension opportunity for various brands. Really powerful, and I think that's critical because it allows us to address a bigger TAM than just our share of the install base. That's another area where I think that's, you're gonna see that tack on in terms of additional monetization.
Yeah. That's really interesting. Is there any appetite for VIZIO to have its own demand side platform?
Yeah, we've looked at it from time to time. I think right now we really like our sort of neutral position. We're sort of agnostic and allow our ad customers to execute through whatever DSP they prefer. I think that sort of agnostic position has worked well for us. There's no rush or urgency to necessarily own it. We like that dynamic. We definitely skew more towards direct sold, but then allow them to execute programmatically or through whatever DSP that they would prefer. I think that's working for us. No need to necessarily go out and do it. We'll continue to create enhancements within our tech stack to improve fill rates and execution efficiencies, and things of that nature. Obviously, I'd love to see people use more of our targeting data.
Today, about 40% of the ad campaigns use some level of targeting. I'd like to see that be 60-40 the other way, right?
Sure.
For all the reasons that we know there's value for both the clients and the viewers themselves. We're gonna continue to bring services to the marketplace, increase the awareness to help drive exactly that. Overall, I think we've got a really, really strong hand to play.
Adam, what about non-advertising revenue? You license part of your ACR data. Well, what specifically do you license, and what do you not license?
I put the data in two buckets. The first bucket is just viewership data, so persons two plus, just generally what's being watched. We have a great data set that, because of our glass level data, it can capture viewership across any input to the TV. We understand what's being watched through cable, we understand what's being streamed, we understand even what game console and what title...
Mm
... is being played. That's a very interesting thing. What we license out externally, just to be clear, is just the general viewership. Measurement companies use that, ad tech companies use that, networks themselves will license that data 'cause they want to be informed. That's great, we monetize it, and I think we've become sort of the currency in the market for that. We have the most robust or the biggest data set available to be licensed, and that obviously gives us great, you know, scarcity value of that data.
Sure.
The second bucket is the customer segmentation level. That's where the targeting capability comes in. That's where we have a better understanding of what that household tends to watch, what does that tell us about them? We can really help advertisers reach the right audiences using that. That, that works really well for them. It also works well, you know, in terms of, like, again, my point about viewer experience, more relevancy is better. That part we keep to ourselves. We didn't used to do that because we didn't have an internal sales force to actually use it.
Mm
... in the right way. We do, and it makes sense to keep that level of data to ourselves. You wanna target our viewers, you come through us, we can help you launch a campaign.
How do you think about the growth of this licensing business?
Look, it's gonna be, it's gonna be pricing driven. You know, I think we're at a scale that matters now, so I don't think that necessarily that the incremental 2, 3, 4, 5 million more households really changes that dynamic.
Okay.
It's pretty representative now. It's based on actual viewership. It's not extrapolation.
Sure
... diaries or what.
Right
... thought they watched.
Yeah.
This is real-time, valuable data. I think we'll have pricing power. I think as we wrap around it, like I said before, services, tools, more analytics, more capabilities, so it's not just a data dump. Giving more resources to the end users, that makes it more valuable for them, and that can help us drive growth. We did see outsized growth over the prior year. We're now lapping on a deal we did with Nielsen for this data. That was a very large deal for us, and so we'll comp against that. The growth rate will moderate.
Sure
... which makes sense as you're going against that. Now that we have that big additional client in our mix, those come up for renewals. These deals tend to be, you know, multi-year, two, three-year type deals, renewal cycles will matter and help us kinda keep driving growth.
Got it. Okay, that's helpful. Can you talk a little bit about the home screen? I think you mentioned it before. How are you monetizing that, and what sort of trends are you seeing there?
Yeah. Our home screen is designed for, first and foremost, search and discovery for the consumer. What comes with that is an ability for content companies to promote their content or even their services as well, or to promote offers. We run with a lot of different partners, you know, 30 day at a special price, and then put it right there in the living room. Again, that real estate is incredibly valuable. It's at the moment of intent to watch. You can't get any closer-
Yeah
... than in the living room. The value that it brings is pretty tremendous. We're architected to help consumers find content they're looking for, but also monetize against that. We have multiple locations across the home screen that are paid for in a variety of ways. What we call the hero banner across the top is a rotating carousel of eight placements that rotates, and that can be bought by HBO, oh, I guess it's Max now.
Yeah.
Max, Disney+. We can even promote our own WatchFree+, FAST channel service on that as well. That's the decision we make. Do we promote, or do we take other dollars from outside companies? That is a really valuable place. You can sponsor other genre categories in the same way. You can pay for placement of the app on the home screen. If you wanna be in that first row or second row, there's ways to do that. We're really designed to monetize that. It's a great destination for us, and it has a very high margin, over 90% margin to it because it's in-house sold.
We pay commission to our salespeople. There's really no other, you know, slippage or leakage of economics from that. We think that continues to be really great for us. As the streaming battles continue, I can't think of a better destination to put a placement than right there in someone's living room.
Yeah.
Much more effective than a billboard on the side of the freeway.
Oh, absolutely. It's tremendously valuable real estate.
Yeah
... in a screen. What about your thoughts on audio shipments, and how are you thinking about that business?
Yeah, it's a great business for us. It's a higher margin business than TV, so we like that. But it's an add-on product, right? Right now, it's been a little bit soft because the consumer under pressure, right? If you need to replace the TV, you may or may not need to replace the soundbar.
Sure.
It's a little bit more discretionary spending.
Yeah.
For that reason, it's been the trends have been a little bit softer. We are number one or number two in the market, depends on sort of the quarter and the measurement, but we're right there with a strong presence in that business. What we've seen is that consumers are moving kind of upstream in terms of the more complex or more feature-rich soundbars. What I mean by that is that you go from just a single soundbar, an all-in-one, 2-channel, all the way up to our, you know, 5.1. They'll be Atmos-capable with a rotating speaker that fires up off the ceiling when there's the right kind of when it detects the Atmos content. I mean, these are complex but really, really affordable, in-the-box, home entertainment solutions.
We have seen consumers move upstream in terms of wanting more and more of those capabilities, and that follows the trend on the TV side, where people are moving upstream in terms of screen size. There's definitely an upsizing going on, across the marketplace right now, and that works well for us as well, because those larger TVs tend to monetize at a better rate. It's definitely accretive to our ARPU.
Yeah.
As we move in that direction, that's very favorable.
Yeah, that makes a lot of sense. What about any thoughts on spending on original content?
Well, we don't think we need to chase or try to add to the clutter of, you know, big tentpole-type content. You're just not gonna compete with those scaled players. What we can do is something that they may not be able to do, which is look at the viewership data that we have and create interesting content with branding partners. We launched a VIZIO branding content studio. The model for this is really a cost-plus model, right? You go out, and you say, "Okay, we're gonna make 3 or 4 episodes of something that's sort of short form," I'll give you an example in a minute, and then bring in a sponsor that pays for the production cost and then some.
We make a margin on it, we own that, and it sits in WatchFree+. It can be accessed at any time. We can run ads against it as people do access it, so there's additional longer tail monetization opportunity. It hones in on something that's sort of based on what we know our users have a high propensity for. A perfect example, going into March Madness, or the basketball tournament, we know we have, you know, 75% of our user base shows an interest in sports, and we have a very high indexing viewership around food and leisure. We did something called Three Pointer, which is basically, we brought in an actor from the Food Network, not Bobby Flay-type person, right?
Yeah.
Something recognizable, but more manageable.
Sure.
Did these short series around what are the, what are the signature cocktails and the food you're gonna serve at your March Madness party, and break that up. It was sponsored by BetMGM, so, you know, sports betting came in, sponsored it.
Yeah.
That model can work really well for us.
Mm-hmm.
It's interesting content for the consumer. It's great for the brands, 'cause they can get out there. You can see how that can expand into a lot of different genres as well. That's kind of the way we're attacking that. You know, I think it's just good value add for our users, just to have some incremental, interesting, unique content there. We don't have to go out and take financial risk to try to make a show, hope someone watches it.
Right.
That's a very different, economic proposition.
Yeah. This sounds very targeted, but it's also really interesting.
Yeah
... and in a weird way to do it...
Exactly
using some of the data that you already have.
That's right.
to understand, like, where the interest levels will be.
That's right.
kind of lowering the risk of the capital deployment associated with it.
Absolutely. Absolutely.
Yeah.
Yeah.
That's really interesting. Can you talk a little bit about Household Connect? For those who don't know, can you describe how that extends, really, the reach?
Yeah, when I was talking about monetizing off platform-
Yeah
... that's the name of the capability that we have. What Household Connect allows us to do is, we did it in partnership with Verizon. They have a over 200 million device graph in the U.S. What that allows us to do is go back to... We understand that mobile device is connected to the home that has the VIZIO TV.
Yeah.
Right? We understand sort of the viewership profile. Then we can go out and help them with audience extension campaigns into mobile ad inventory, to allow brands to either counter-program, extend reach, or reinforce. If you're a particular fan of a show, for example, and maybe Max is advertising a show on our home screen, 'cause it's running their service right now, and they know you've had a propensity to watch that kind of content, it may be very valuable for them to then do some audience extension capabilities on mobile to reinforce-
Sure
... in that environment, that, "Oh, yeah, I gotta get home tonight and watch..." whatever the show may be, right? I think that's, it's just a great technology. It's a great way for us to leverage our capabilities and extend monetization out. I think our clients who are using it love that, because they can decide to reinforce, alter the message, counter-program against somebody else if they want to, but it takes that to a whole different, broader TAM than just thinking about trying to maximize on our living room space.
Yeah. No, that makes a lot of sense. I've asked all of the CFOs today, this question around.
Sure
... AI, right?
Oh, sure.
And like-
Yeah.
Two questions, I guess. One, when you put your CFO hat on and look at productivity, are there things that you're doing with AI to improve productivity? Secondarily, from a product standpoint, is there anything.
Yeah
... that you're thinking about?
Yeah, absolutely. I mean, we are encouraged by AI. It's obviously early, and we're gonna be measured about how we think about it, but it is a... We view it as a net positive to where we already are today. In operationally, as you brought that up, places like customer service, great opportunity to create efficiency there with speed to answer issues, questions someone may have, that can be handled by AI, and/or all of our service reps have to log their calls, take notes while they're trying to service the customer. The quality of those notes can improve with using AI, because it can just do it in a much more efficient way, simultaneously, while the call's going on.
Yeah.
That's just an operational example of what we can do. You reduce the call times, you reduce the speed to solution, and there's just immediate economic benefit there. That's one example. There's places around, you know, kind of simple, some code writing can be done this way, then we have editors.
Sure
... who get involved and make sure that it's correct. There's elements of that that can happen. We've been using AI from a product standpoint, and AI is kind of a word everyone kind of broadly throws around.
Yeah.
Our recommendation engine capabilities is a version of that, right?
Sure.
Understanding what someone's watching, re- recommending and placing recommendations on the home screen, again, to drive engagement. That's a place where we do that, and we can get smarter and smarter about that, using more sophisticated tools as well.
Yeah. Yeah.
A lot of places where I think it benefits us, on a net positive basis. That's even before getting into the content side. If people might make content driven by AI.
Right
we certainly can be the distribution platform for that as well.
Sure. Sure. I think we're just about out of time, so maybe, if you wanna take the opportunity to talk to the audience about what's most misunderstood about the VIZIO story, and why is this maybe a particularly good time to think about investing in VIZIO?
Look, I think we've gone through a pretty radical transformation in a compressed timeframe. We went from a company who spent 18 years building awareness in the market as a brand around hardware. This platform side is now really taking off, and we've proven it. It was concept a couple of years ago. We did almost $500 million in platform revenue last year. I think the street's at somewhere around $600 million for this year. Really different who we are today. Our platform business is now about 30% of revenue and 98% of our gross profit dollars. I think that transformation happened quickly. We've now proven the trajectory that we're on, that we can do it, we can execute against this strategy.
I think, frankly, the Street has to catch up and understand how this works now, and that this model is really about this customer acquisition, plus a lifetime value, and really rethink the way that the economics flow to the company.
Yeah. Well, you've shown excellent results so far, best of luck in that.
Thank you.
Thank you so much, Adam.
Yeah.
Thank you for being here today.
Thanks for having us.