UiPath Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 30, 2023

Key Takeaways

  • ARR grew 24% year-over-year to $1.378 billion and revenue rose 24% to $326 million, while non-GAAP operating margin expanded 600 basis points to 13%, generating $44 million in free cash flow.
  • FX-adjusted dollar-based net retention was 123% and net new ARR reached $70 million, driven by a record number of large deals in the quarter.
  • The launch of the 2023.10 platform release introduced AI-powered Autopilot capabilities for Studio, Test, and end users, alongside next-gen IDP that cuts model training time by up to 80%.
  • Strategic partnerships were expanded with SAP, Deloitte, Amazon Bedrock, and plans for a Google Cloud Marketplace listing, enhancing UiPath’s ecosystem reach and integration.
  • Macro headwinds in the SMB segment led to a strategic pivot toward higher-propensity enterprise customers, indicating uneven demand across the customer base.
AI Generated. May Contain Errors.
Earnings Conference Call
UiPath Q3 2024
00:00 / 00:00

There are 15 speakers on the call.

Operator

Greetings, and welcome to the UiPath Third Quarter Fiscal 20 24 Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kelsey Turcotte, Senior Vice President of Investor Relations for UiPath.

Operator

Thank you. You may begin.

Speaker 1

Good afternoon, and thank you for joining us today to review UiPath's Q3 fiscal 2024 financial results, which we announced in our earnings press release issued after the close of the market today. On the call with me are Daniel Deniz, UiPath's Co Founder and Co Chief Executive Officer Rob Enslin, Co Chief Executive Officer and Ashim Gupta, Chief Financial Officer. Rob will start the discussion and then turn the call over to Daniel. After that, Ashim will review our Our earnings press release and financial supplemental materials are posted on the UiPath Investor Relations website, ir. Uipath.com.

Speaker 1

These materials include GAAP to non GAAP reconciliations. We will be discussing non GAAP metrics on today's This afternoon's call includes forward looking statements about our ability to drive growth and operational efficiency and grow our platform as well as our financial guidance for the Q4 fiscal 2024. Actual results may differ materially from those expressed in the For a discussion of the material risks and uncertainties that could affect our actual results, please refer to our annual report on Form 10 ks for the year ended January 31, 2023 and our subsequent reports filed with the SEC, including our quarterly report on Form 10Q for the period ended October 31, 2023, to be filed with the SEC. Forward looking statements made on this call reflect our views as of today. We undertake no obligation to update them.

Speaker 1

I would also like to highlight that this webcast is being accompanied by We will post the slides and a copy of our prepared comments to our Investor Relations website immediately following the conclusion of this call. In addition, please note that all comparisons are year over year unless otherwise indicated. Now, I'd like to hand the call over to Rob.

Speaker 2

Thank you, Kelsey. Good afternoon, everyone. Thanks for joining us. Our 3rd quarter results underscore the compelling value our Our end to end automation platform delivers for our customers and the strength of our business model. For the quarter, ARR grew 24 percent to $1,378,000,000 Driven by a 3rd quarter net new ARR of $70,000,000 more revenue was $326,000,000 Up 24%.

Speaker 2

We continue to deliver growth while driving operational efficiencies across the organization. Non GAAP operating margin increased more than 600 basis points year over year to 13%. We also delivered non GAAP adjusted free cash flow of $44,000,000 As many of you know, at the beginning of this fiscal year, we pivoted Our go to market resources towards organizations that have a meaningful right to invest in enterprise automation over the long term. This investment has significantly increased our presence in the C suite and helped raise our profile with partners of all sizes. You could feel our momentum at FORWARD 6, our annual user conference, where we hosted more than 3,000 guests, Including automation practitioners, industry visionaries, key custom decision makers, we also launched our inaugural UiPath A10 AI Awards Program recognizing UiPath customers who embody what it means to be a leader in AI at work.

Speaker 2

I left the event super energized about the tangible value our platform is delivering for our customers and our leadership position in the market. FX adjusted dollar based net retention for the quarter was 123%, and we closed a record number of 3rd quarter deals over While customers with $100,000 or more in ARR increased to 1974. Industry verticalization continues to be a strategic priority for the company with playbooks, marketing events and enablement to support our teams. We now have 70 solution accelerators available in our marketplace, with IT service management software, user provisioning and two way match Invoice processing for Cooper and SAP among some of the most popular downloads. While we saw broad based strength in net new ARR across industries this quarter, there were a couple of standouts.

Speaker 2

The federal team delivered a record quarter as agencies are increasingly standardizing on our AI powered business automation platform with a robust set of End to end capabilities to enrich employee experience, create mission, readiness and achieve breakthrough outcomes. Customer highlights included Veteran Affairs, Coast Guard, the IRS, the Department of Homeland Security. We're also working with the United States Department of Agriculture to support their future of work initiative, delivering a new era of citizen and employee experiences. Using our full platform, USDA is driving mission impactful enterprise automations across the HR, Finance and IT departments. The program also features a digital assistant on every USDA employee desktop, driving personal productivity for approximately 1 100,000 employees.

Speaker 2

Momentum continues in financial services and healthcare, where automation delivers considerable value. This includes one of our top 25 customers, a large non profit health system in the United States. Taking a deeper look at their automation journey, They are a great example of how customers expand with us over time. Working closely with our account executives And Global Systems Integrators, their journey started in 2018 with core RPA and over the last several years, they've To date, they have achieved a return on investment of over $250,000,000 and this quarter, In one of our largest deals in company history, they expanded to the full platform as they work to create a centralized enterprise automation service department With a mandate from their EVP sponsor to deliver automation across the entire enterprise. They're also in the process of developing use cases for communications mining and UiPath apps.

Speaker 2

Customers standardize on our AI powered automation platform to deliver transformational outcomes that streamline processes, eliminate errors, Operator, with the enterprise quality execution needed to succeed in today's environment. A great example is Johnson Controls. After starting the automation journey in 2021 with Core RPA, they adopted the full UiPath platform as they work to consolidate The automation program to one end to end solution. They also plan to leverage our AI capabilities like document understanding, test suite and task mining to Automation across their entire business. And another example is Department of Work and Pensions, The United Kingdom's largest public service department.

Speaker 2

They have been using core RPA since 2018 to help their most Vulnerable citizens improve their quality of life by automating millions of service and support claims each year. Since their first deployment, they have scaled to over 1,000 robots in production and saved 3,100,000 hours to date. During the quarter, they expanded to the full platform as they look to harness AI and integrate document understanding, process mining, Communications mining into their automation program to improve citizen services, drive operational efficiencies And increased cost saving and capacity creation. We're also landing new logos, which are adopting multiple platform products in their first purchase, Like Tenable and Kik, customer products. In their first phase of deployment, Kik intends to leverage unattended robots And document understanding to drive efficiency across the finance department, with the long term goal of scaling automation across the entire enterprise.

Speaker 2

Our value based go to market tool, NorthStar also continues to drive deeper customer conversations As we strategically position the differentiated and actionable benefits of AI powered automation. A great example is Sobeys, a customer since 2020, where we created a North Star roadmap to help them maximize The return on investment of their automation program and as a result, Sobeys expanded the automation footprint in the quarter to streamline processes in finance, Merchandising and supply chain and to improve the hiring process in stores. They are also investigating how they may Turning to our SAP partnership. While in the early stages, we are excited about the collaboration between our teams. I recently joined Scott Russell, SAP Executive Board Member Customer Success to co host their sales leadership meeting and continue to see success in signing new logos from this partnership.

Speaker 2

Key one for me, the Honors Group, Tim Tam in Australia, an Australian legend, the Australian producer of biscuits And Snackfood, The Honest Group selected the UiPath platform to optimize business processes and reduce operating costs. Their initial focus will be on automating end to end sales order and invoice processing. We also announced an expanded partnership with Deloitte, platform into the Ascend service delivery platform, powering the next generation of SAP transformation. These strategic relationships are powerful for our customers, but they also drive increased engagement with GSIs and our partner ecosystem That has never been more invested in than they are right now. At Forward VI, we hosted an impactful session for more than 7.50 partners, Outlining our streamlined strategy that is designed to accelerate growth and revenue for our partners, while creating solutions that deliver exceptional value To our customers, our partners and GSIs are an important element of our go to market motion That help us expand our reach to customers in a scalable, efficient and cost effective way.

Speaker 2

For example, Working with Deloitte, an Australian government agency has built a robust automation program across their finance and HR business lines, where they utilize document understanding to streamline invoice processing, reduce errors and enhance data accuracy. To further accelerate the automation program, they adopted task mining in the quarter to analyze processes and accelerate scoping activities. Broadening our technology ecosystem also makes it easier for customers to deploy automation. We recently announced several new strategic partnerships. These include Amazon Bedrock, which enables automation developers and citizen developers to seamlessly Integrate generative AI directly into their Uipash Studio and Studio Web Automation And the availability of the AI powered business automation platform on the Google Cloud Marketplace early 2024.

Speaker 2

In summary, 3rd quarter results are another proof point of our commitment to delivering Strong top line growth and expanding profitability and non GAAP adjusted free cash flow. I want to thank our employees and partners for their support. None of this would be possible without your relentless focus on unlocking value for our customers day in and day out. And with that, I'll turn the call over to Daniel.

Speaker 3

Thanks, Rob. Good afternoon, everyone. Thanks for joining us. The automation market is at an inflection point As the market leading tool that enables organization to derive actionable value from AI, we believe This is a huge opportunity for UiPath. At Forward VI, we introduced our latest platform release 2023.10 and delivers scores of new capabilities that seamlessly translate the potential of AI Into tangible action to drive business outcomes for our customers.

Speaker 3

From my perspective, one of the most exciting announcements At Forward was UiPath Autopilot, a new set of AI powered capabilities for developers, testers, analysts Acknowledged Workers designed to enhance the user experience across the UiPath platform. We expect Autopilot, which is based on generative AI to bring our unique capabilities in RPA, API Automation, Document Understanding and Specialized AI to the full spectrum of enterprise grade end to end process Automation. Autopilot for Studio is intended to help developers across skill levels, Build automation faster by leveraging natural language descriptions to generate automation workflows. For less technical developers, this is a great starter tool, while an advanced developer will benefit from increased productivity. Autopilot for test will accelerate every phase of the testing lifecycle from generation of test Surfacing insights from test results.

Speaker 3

And finally, as the AI companion for business users, we anticipate That autopilot for everyone will help users create and use personalized And intelligent micro automations on the fly. We also share exciting announcement Around intelligent document processing at Forward, introducing our next generation experience Powered by active learning and generative AI, our next gen IDP permits almost anyone to Train specialized AI models for specific domains and document types and our internal benchmarking shows that our next PGEN IDP experience accelerates model training time by up to 80% from a week To a day for complex scenarios, we're down to minutes for simpler forms. Document understanding is driving Significant value for customers, including a Chicago based public utility. Working with Deloitte, They have created a robust automation program across their organization, leveraging our AI products Like document understanding to automate their meter inspection process where they have achieved over $12,000,000 And 163,000 hours in savings to date. With C level sponsorship During the quarter, they expanded their UiPath deployment to incorporate test suite into their automation journey with the goal Saving over $70,000,000 a year, and we are humbled by third party recognition of our achievements, Including IDC Marketscape, Worldwide Intelligent Document Processing or IDP 2023, 2024 Vendor Assessment, or UiPath, was named A leader in IDP for our broad market leadership and robust IDP capabilities in new iPaaS, Document understanding and communications mining integrated into our broader enterprise automation platform.

Speaker 3

Innovation is the cornerstone of our strategy, and we challenge ourselves every day to deliver market leading capabilities With the customer first mindset, I spend a lot of time with our teams in both Belgium and Romania this quarter And I'm energized by our cutting edge product roadmap focused on transforming enterprise automation By harnessing the next generation of AI technologies, together with our world class team of engineers, I am excited to dedicate more time driving UiPath's innovation agenda as I transition into my new Chief Innovation Officer role this winter. With that, I will turn it over to Ashim.

Speaker 4

Thank you, Daniel, and good afternoon, everyone. Turning to the Q3, ARR totaled $1,378,000,000 an increase of 24%, driven by net new ARR $70,000,000 Excluding the FX tailwind, net new ARR totaled $69,000,000 We ended the quarter with 10,865 customers, including new logos like New Relic, Smile Doctors, Beacon Health System And Midwest One Financial Group. As we said last quarter, we continue to see macro headwinds at the lower end of our market and remain focused on acquiring customers with a higher propensity to grow. Our dollar based net retention rate for the 3rd quarter Dollar based gross retention of 97% continues to be best in class. Revenue grew to 3 $6,000,000 an increase of 24% year over year.

Speaker 4

Normalizing for FX, which was an approximately $3,000,000 tailwind, Revenue grew 23%. Remaining performance obligations increased to $995,000,000 up 31% year over year. Normalizing for FX, which was an approximately $16,000,000 tailwind, RPO grew 29 Current RPO increased to $599,000,000 Turning to expenses. We delivered a 3rd quarter overall gross margin of 87% and software gross margin was 92%. As the team continues to drive cost discipline, we now expect fiscal year 2024 gross margins to be approximately 86%.

Speaker 4

3rd quarter operating expenses were $240,000,000 highlighting the leverage in our business and our commitment to expense management and operating discipline. GAAP operating loss of $56,000,000 included $96,000,000 of stock based compensation. Non GAAP operating income was $44,000,000 resulting in a 3rd quarter non GAAP operating margin of 13%. 3rd quarter non GAAP adjusted free cash flow was $44,000,000 As of October 31, we Under our $500,000,000 buyback program, which we announced on September 6, we repurchased 3,200,000 shares of our Class A common stock At an average price of $16.26 through October 31. Since November 1, under a 10b5-1 plan, We've repurchased an additional 1,700,000 shares at an average price of $17.38 through November For the fiscal Q4 2024, we expect revenue in the range of $381,000,000 to $386,000,000 ARR in the range of $1,450,000,000 to $1,455,000,000 Non GAAP operating income to be approximately $78,000,000 and we expect 4th quarter basic share count to be approximately 567 1,000,000 shares.

Speaker 4

And finally, we expect fiscal year 2024 non GAAP adjusted free cash flow With that, I will now turn the call over to the operator. Operator, please poll for questions.

Operator

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer Our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed with your question.

Speaker 5

Great. Thank you. You got theo tune on for Keith Weiss. Maybe to start off, quick question on sort of AI and how you see it fit into the current budget environment. Clearly, budget growth is still somewhat suppressed.

Speaker 5

And you're one of the few companies that's sort of uniquely positioned between traditional automation and Generative AI Technologies, where do you see customers kind of take the dollars from when they're spending on these AI technologies, Whether that's within the product areas that you offer or more broadly, anything that's kind of coming out of your customer conversations in terms of how Ben, just getting reallocated in light of AI?

Speaker 2

Yes. Good question. What I would say is that When customers are looking at spending with us and the AI story and AI connection, AI To Automation Connection, really fits well to where customers want to invest. And in many cases, the investments are coming out of the business case and business value that we produce And are able to show the efficiencies in how to gain, so they can invest in innovation, and they see us as an innovation leader today With AI and innovation combined with our AI powered platform. So, I don't like it's been taken away from one group to another.

Speaker 2

I feel it's really driven by the business case we're able to drive with C Level Suites and now we focus on Industry Solutions and now we've connected those To the buying cycle with customers.

Speaker 5

Great. That's helpful. And then a quick question on the margin side. It looks like sales and marketing expenses stepped up pretty markedly on a sequential basis. Obviously, you also had your Forward Conference in the quarter.

Speaker 5

But anything that you can highlight in terms of where you're investing? Are you back to kind of growing your sales force more markedly? And does that kind of continue into next year? Anything that you can share there would be great.

Speaker 4

Yes. I would just highlight two points. First is, we are going to continue to invest in our sales team And our sales capacity, especially as we head into next year. And then the second is, if you recall, we also are dealing with We also have the reallocation of our software expenses. So 1st through Q3, you'll see sales and marketing versus G and A, a little bit

Operator

Our next question comes from the line of Mark Murphy with JPMorgan.

Speaker 6

Thank you so much

Speaker 7

in all that, my congrats. So Rob, I'm thinking back to the Analyst Day just over a year ago, and You had mentioned there that every tech company, of course, has shelfware and that UiPath

Speaker 8

does as well.

Speaker 7

If you think about it about a year later, do you sense that customers have worked down any excess inventory they might have had in terms of bots, Maybe hitting a level where they might need to replenish and just start moving forward a bit faster as we get into next year? And then I have a quick follow-up.

Speaker 2

Yes, Mark. Look, as I said earlier on, companies deal with shelf wear, we feel good that our platform actually helps us Move customers from not only bots into the broader platform as they focus on efficiencies, this marketplace that we're dealing with today Certainly benefits efficiencies and new business model. So, we feel really good that we are able to take customers to the next level with our Platform and our C level activity.

Speaker 7

Okay. And Ashim, when we look at it arithmetically, the deceleration ARR has been moderating, which of course is great to see. It looks like you could step down a bit closer to 20% next quarter, but Is it possible to entertain the thought of holding kind of holding a level around 20% for a period of time? Or Do you think we should kind of keep that trending down into the teens as we've had it? Just Try to be mindful of the law of large numbers and some of the macro unknowns that are out there.

Speaker 4

Yes. I would just say, We're really pleased with our performance and the team's execution. We're focused on closing out a good year And the teams are really focused on that. And we look at our 4th quarter guidance just putting the right prudence and the right macroeconomic

Operator

Our next question comes from the line of Kirk Mettern with Evercore. Please proceed with your question.

Speaker 9

Hi. Thanks for taking the question and congratulations on a very strong quarter. This is Chirag on for Kirk. In your prepared remarks, you mentioned that large deals landed extremely strong. Do you have any additional commentary around What you're seeing with these large deals in terms of both new logos and renewals and how you expect this trend to continue looking ahead to Next quarter and next year, essentially all in all, do you believe that we're close to a more stabilized Macro and spending environment or are you still seeing some broader choppiness out there?

Speaker 9

Thank you.

Speaker 2

Yes. I mean, we Look, we feel really good about how our teams are adopting all the changes that we've made and how they're connecting with And the relationships we're having with customers, the expansion is really, in many ways, driven through our growth products with all the AI Communication that's happening in the market allows us to have meaningful conversations with customers. They see why the platform is relevant. And then we as I said earlier on, we've been driving NorthStar quite a bit in showing where customers can really look at processes and tasks and understand how to drive value with The automation platform. So folks talk about digital transformation and Connect.

Speaker 2

We believe that AI powered automation is really helping digital transformation With our customer base and our larger customers. And we're pretty happy with some of the net new companies that we've acquired over the last The quality of them, New Relic, you look at these kind of these are good companies. They will expand with us over time if we do the right stuff. And so We feel good about that. We feel good about how our industry focuses is helping us change the game in this environment.

Operator

All right. Thank you. Our next question comes from the line of Brad Sills with Bank of America. Please proceed with your question.

Speaker 10

Great. Thank you so much. I wanted to ask a question around some of the departmental expansions you've seen. You talked about Industries here, I think banking and public sector sounded good. But are you finding that you're seeing now with The uplift in expansion activity here with NRR that you're getting outside of finance and accounting into IT, HR, some of these other use cases in

Speaker 2

the Yes. So, I would say we have broad we've seen broad industry activity We feel really positive about public sector and public sector globally. And we also see a significant amount of Activity outside of the finance office in procurement and in the IT organization. So it's much more broad based, and we feel really good about We're focused on that.

Speaker 10

Great. And then one on the forward conference, if I could, please. If you Just remind us how important that event is for lead management and moving deals through the pipeline and how do you feel coming out of the conference this year versus years past

Speaker 2

Brad, I've only got 2 years experience. And what I would tell you, I was super excited to see the quality of customers The quality of the events and the quality of the discussions that we had, if you look at the companies we had on stage with us and what they were doing with us, these are really Transformational. If you look at the partnerships with SAP and Deloitte on stage with us, this was transformation. Spoke about 750 partners that we're aligning around the channel strategy. So we feel good that we actually forward is actually A catalyst event to move UiPath, help our branding, position us in the C Suite and make a difference, and it certainly does help our pipeline as well.

Operator

Our next question comes from the line of Ramon Lenschow with Barclays. Please proceed with your question.

Speaker 11

Thank you. Congrats from me as well. First, like a more bigger picture question. Like if you Think about the different areas of strength that you saw this quarter, like can you Specifically speak a little bit about what you saw on test drop, because that's what we hear from our Czechs as one of the areas where especially in the SAP ecosystem seems to be a lot going on there and I'm not quite sure you're getting enough credit. And then I had a follow-up for Ashish, please.

Speaker 2

Yes. It's So, if I look at the broader picture, if you look at the market today, as I said early on, customers are looking for Ways to drive efficiencies to fund other activity and there's not a significant amount of New business models that are driving growth. So that really helps us significantly. And obviously, that fits well into where SAP Our focus with their transformational objectives, the RISE program, which is an ongoing program. And it's I believe that we've actually moved the needle significantly with With the SAP activity between the different sales organizations, and we are involved in many transformation discussions with SAP And our GSI partners, and we will see more of that.

Speaker 2

Test is a key part of that, It has an incredible value proposition, which allows customers to drive not only not necessary Savings but time benefits and really automation of testing is one of the biggest challenges customers have In a big SAP environment, and we feel we do an excellent job helping customers achieve significant test results, which obviously Help mitigate any risk associated with go live.

Speaker 11

Yes. Okay, perfect. Then one for Ashish. As you think about like it does look like the demand trends And we kind of could potentially look for better times ahead. You obviously, you have the best net ARR addition for a few quarters now as well.

Speaker 11

How do you and you guys but also you guys have been very disciplined around Cost and margins, but at some point you need to think about lead times for salespeople, etcetera. How do you think about That balance of like getting ready for eventually better times versus where you are at the moment, what are you seeing in terms of productivity gains for sales, etcetera, for example,

Operator

I mean,

Speaker 4

I would start with we have a very powerful business model, Raimo, Strong gross margins that allows us to invest while still generate cash and margins. And so we have been investing Whether that is within our product team as well as our sales team, I mentioned earlier, we're investing in our frontline sales team and our sales capacity And we'll continue to invest in areas where we see the right returns and the right investments. And Rob and the team looks at that On an ongoing basis, and we do as a leadership team. At the same time, we also are looking for efficiencies. So together with I think we're constantly in investment mode.

Speaker 4

We feel very positive about our value offering and We feel like we can both drive that investment while still generate cash and margins.

Operator

Our next question comes from the line of Terry Tillman with Truist. Please proceed with your question.

Speaker 8

Yes, congrats from me on the quarterly results. First of all, I guess, Rob, maybe the first question is, maybe I'm pretty simple here, but NorthStar roadmaps seem like a no brainer. Like how much of your customer base or at least your larger enterprises, have you actually unleashed The NorthStar road map is on. And the second part of my first question is, I'm hearing a lot from you about full platform adoption. Have you done anything with

Operator

product or packaging to create less inertia to move all in with the platform?

Speaker 8

And then I had a To create less inertia to move all in with the platform. And then I had a follow-up for Ashim.

Speaker 2

Sure. Great questions. So, I would say, we are doing a lot around pricing and packaging and, obviously, Pricing, Packaging and Solutions, and it's a constant upgrade, I would say, of that, but you got to be very careful about how you actually bring that into the market. And we are focused on really simplifying SKUs and so making it very simple for customers to purchase and also make it simple for customers to mix and match Solution sets with AI units or bots in a way that's very simple so that they can actually expand with less friction and we're doing significantly more of that. Connected to the C suite, you have to have sellers that are able to communicate that.

Speaker 2

And as we enable our organization more and we get more References, we're able to scale more and continue to scale the organization. So there's still plenty opportunity for us to continue driving that and continue to work And all star with the organization.

Speaker 8

That's great. Thank you for that, Rob. And I guess, Hashim, in terms of all the work on the go to market side this year, Is there potentially a further drift in NRR? Could it actually improve from here? I mean, it's already best in class, but I'm Curious how you could see NRR trends potentially with more of the harvesting of all this work on

Speaker 6

the go to market side? Thank you.

Speaker 4

I'd just say we continue to be pleased with where we are and how we're executing and we're going to look forward to closing out Q4 and we'll provide more updates Next year.

Operator

Our next question comes from the line of Fred Haemeyer Please with Macquarie, please proceed with your question.

Speaker 10

Hey, thank you very much. And I'd also like to congratulate you on a very Strong quarter. I wanted to focus once again on generative AI. But firstly, looking at your products to see it being integrated Throughout your portfolio and your suite, I'm looking forward to really seeing what you can do there. But I wanted to take, I guess a bigger picture look at the longer term outlook of the market considering some of the impressive results we've seen with Autonomous Agents Using, for example, like GPT-four, blending, vision, text, etcetera.

Speaker 10

I'm curious, considering that UiPath has really been one The original autonomous agent companies with your attended and unattended RPA, how do you think about the market evolution over time With HD based or agent like functionality being built using generative AI now?

Speaker 3

Well, I think that direction in the market that we are seeing right now around autonomous agents Prove a bit our approach that always said that AI plus automation is The thing that drives the biggest outcomes for our customers. Actually, this is what we have seen. A lot of our customers, After the initial a little bit of a pause around how AI is going to help me with my automation, They realize that they need powerful automation platform in order to harvest the power of AI. And going forward, on a longer term basis, we at UiPath are in one of the best positions to build the next Generation foundational model that understand processes, tasks, screens And documents, a type of multimodal that is built in, in order to Drive automation. So it's to me, it's clear that the world is going In good direction.

Speaker 3

And again, we are really in a very good position to take advantage of it.

Speaker 10

Thank you for that. I'm looking forward to having an intern as a service to be able to help out autonomously and everything. I hope also just Related to the topic here of generative AI, I've consistently heard feedback about the difficulty of organizing one's own data within Enterprise in a way that's useful. And so I'm curious what you're hearing from your customers about how they're Beginning to and attempting to approach their own generative AI strategies and whether UiPath's automation platform is really able to help

Speaker 3

Yes. Actually, this is one of The major use cases where automation is used right now in order to fine train custom LLMs Or even specialized AI. And it's frankly one of the hot discussion points With our partners around the world, we had interesting discussions in Japan and in U. S. With companies like Accenture or Deloitte that are very interested into They can leverage automation to clean the data and to accelerate custom training of

Operator

Our next question comes from the line of Siti Panigrahi with Mizuho. Please proceed with your question.

Speaker 7

Thank you. So it's good to

Speaker 6

see this net new ARR bounce back. So as you speak with your customer, What do you think the enterprise spending trend would be next year in terms of even priority for automation spending?

Speaker 2

Yes. I mean, we've done we've looked at different analysts in different markets. And many analysts would tell you that they see Cloud and data and cyber and automation is the key trends in terms of spending next year. But I would caution and say, customers are, as I said earlier on, are very thoughtful in how they want to spend, where they want to spend and how they're going to fund it, Which benefits us and benefits us in the way that we actually approach customers. I don't see a significant change in that spending.

Speaker 2

I do think that Customers are going to look to see how AI and AI automation and Gen AI can help them drive more efficiency and deeper levels of in the organization and look at different models when it comes to customers and our customers, how they communicate with customers, how they drive customer journeys as well. And we are focused on helping our customers with that approach in a deep way. Also connecting meaningful Inputs and outputs in companies around documents and social communication, e mails into this process in order to drive real process orchestration at a different level.

Speaker 6

Thank you. And Asim, a follow-up. If I capture your total customer count, it seems like it has come down this quarter, But you guys also had a pretty good on your enterprise segment spending. So Wondering like was there anything different you saw in different segments like small versus mid to large segment?

Speaker 4

Yes. Look, we're very pleased with how our Enterprise segment is performing. The macroeconomic variability that we've talked about Has had a more pronounced impact on the lower end of the market with smaller businesses, and that's where we see the majority of our Customers, which Rob mentioned also earlier. Overall, I think our strategy remains consistent. We're focused on the quality of customers and we define quality as Customers with a high propensity to buy and we like the way the teams are executing against that strategy.

Speaker 3

Great. Thanks for the color.

Operator

Our next question comes from the line of Michael Turits with KeyBanc.

Speaker 12

Congrats on solid execution. So two questions. 1, Where are we in terms of the shortening of the deployment time for the average bot? It seems like it already improved. And Does the rollout of Autopilot help shorten that time even further?

Speaker 12

And then I have a follow-up for Ashim on a follow-up for Ashim. Thanks.

Speaker 3

This is always one of our major product focus on how can we Short on the adoption curve for our customers. And we are already seeing with our autopilot family that In private preview, some really good results with the initial set of few 100 Of customers that are testing the product. So, yes, I would say that This is going to be a significant driver for adoption and both for advanced developers Where they will get really increase the productivity to also citizen developers that We'll get started faster. And also, I would like to mention that training our specialized document understanding and communication mining models Using Gen AI, it has already proven. This is actually in production already and it has been proven to accelerate The deployment quite a bit.

Speaker 12

Thanks, Daniel. And then, Ashim, on the NRR, it's great to see it having stabilized On an as reported basis, but it did go down another 2 points as it did last quarter on an FX adjusted basis. So What are the puts and takes there? You're actually getting slightly easier comps. So what's Pulling that down at this point and what are the things that are working and trying to actually increase in NRR?

Speaker 4

Yes. I mean, I look at our dollar based net retention adjusted for FX, it's 123%, which in our scale we're very pleased with and continues to be in a best in class territory. There will always be a little bit of large numbers and of course every quarter's deal mix will change. But overall, we're really pleased with the strategy. I think we've had several marquee deals in the quarter.

Speaker 4

The penetration and the sale of the platform, as Rob mentioned, We continue to make really good progress on and we see very good strong performance in the enterprise segment, Particularly in North America. A lot of the whatever headwinds we do see, we see really pronounced in the more pronounced in the lower end of the market. But overall, our strategy is on customers with a higher propensity to buy. We feel like we're executing against that strategy and we're seeing that results in the deal quality and the customer quality And the customer quality in the quarter.

Operator

Our next question comes from the line of Scott Berg with Needham and Company.

Speaker 13

Your net new ARR was up year over year for the first time, I believe, since Q4 fiscal 'twenty 2. So nice change there on the positive side. I think most of the questions have been on your execution within the quarter. How about commentary from the demand end of the market? Are you seeing any changes around your customers or the environment, more mid market and enterprise because you mentioned the down market couple of different times in the macro impact there, but are you seeing any sort of positive change upward in demand from whether it's existing customers or net new?

Speaker 2

Yes. I mean, I do definitely see positive demand, positive conversations in the market. We feel like we have A significant seat at the table with the AI, OpenAI and Chat GPT kind of discussion that's been taking place and plus having the platform has allowed us to have C level conversations. We have customers now that are really calling us to actually have Discussions where they've been using core RPAs since 2018, 2019, and they feel like there's an opportunity to expand it. They're not getting all of that they're are not getting as much value as they believe they could get out of it and those conversations are taking place and we are able to actually showcase proof points on how to do this.

Speaker 2

So, yes, definitely more positive and definitely Feel good about the discussion on how we can help customers and how we are more relevant to the business discussion.

Speaker 13

Got it. Helpful. And then, Ashim, your current RPO metrics growth rate accelerated pretty meaningfully quarter over quarter. Was there any one time anomalies, I don't know, early renewals or something that impacted that abnormally in the quarter? Or was that a pretty clean calculation metric?

Speaker 4

Thank you. No major abnormalities like early renewals, etcetera. I think I've mentioned we had several Key deals in the quarter and record number of deals above $1,000,000 for a 3rd quarter. So it's just it's Execution and really good deal quality that's driving that metric.

Operator

Our next question comes from the line of Michael Turrin with Wells Fargo. Please proceed with your question.

Speaker 9

Hey, great. Thanks for taking

Speaker 14

the question. Two part, I'll just ask upfront. Rob, given investments you mentioned in reaching the C Suite, wondering if you can provide us With your perspective around how enterprise customers are approaching IT budget growth into next year and automation as a Part of that. And then as a second part for Ashim, can you comment on the visibility you have into 4Q forecast Currently, any swing factors for us to consider in terms of potential upside there? Thank you.

Speaker 2

Yes, Michael. I'll take it and I'll let Ashim go later. Because we're having these conversations in the boardroom, Customer conversation is much more at sea level. We're much earlier in the budget cycles than we've previously been And we're actually much more important in the budget cycle than I believe we've been previously. And I think there's a couple of really key points that stand out, right?

Speaker 2

Our industry How we've driven industry and how we made ourselves relevant in particular industries and the value proposition there, I do believe that the global Integrators and how they've come along in support of us, the messaging around SAP has driven well and the platform proof points around DU and I announced the customer that had $250,000,000 savings in my earnings script. This is what's really allowing us to participate. And so we feel like we are meaningful part of where the budgets are going next year. I think everybody is looking at how tight their budgets are and trying to find out how to move from one pocket to another pocket on the innovation We are definitely on the innovation side of customers' thinking. And then I'll hand it over to Ashim.

Speaker 4

Yes. So just in terms of our guidance, We've factored in the macroeconomic variability that we've talked about and it includes the current view of our deal mix. And we look

Speaker 2

at just executing. The teams

Speaker 4

are focused on executing a good end to year end close to the year. And that's what we're focused on. That's what I would

Operator

Our next question comes from the line of Bryan Bergin with TD Cowen.

Speaker 14

This is actually Jared on for Brian tonight. In terms of the competitive environment, any changes from what you're seeing from Microsoft ServiceNow or Automation Anywhere?

Speaker 2

Yes. If I look at ServiceNow, we don't see them in many opportunities. What I will tell you, Our ServiceNow Connect is the one of the most it is the most popular downloaded connector to UiPath, and we continue to partner with them. And our partnership with Microsoft around CoPilot and our Autopilot, the discussions we're having with them continues to be robust and we're very happy with we're going with Microsoft and that partnership. And as for a lot of the traditional RPA vendors, I feel that we are now We've broadened our skill sets and what we're offering, we don't see them that often anymore.

Speaker 14

And then do you have any data points on how the new bundled pricing packages is increasing revenue uplift per client or anything around Revenue uplift from the reduction of SKUs as part of the sales refresh?

Speaker 2

There are no specific that we can point to now. I mean, We're looking at the results. It's probably a little bit too early for us to kind of come out with where we are on that. But we do feel good that the early signs of I would just simply say, easier for customers to understand, easier for them to move. They definitely like How they're able to use our AI units across multiple products and interchange them as As they think of new use cases to advance their business as well.

Operator

Our next question comes from the line of Alex Zukin with Wolfe Research. Please proceed with your question.

Speaker 5

Hey, guys. This is Ethan Virkon for Alex Zukin. And thanks for taking the question and congrats on I guess, Rob, this one might be for you. Just if we were to like unpack a little bit and like more color just some stuff you saw in the quarter in terms of Just either like certain verticals where you saw I know you mentioned around like the variable demand, but just kind of comparing from the macro maybe by vertical basis Is something got improved or a little more steady versus the last few quarters you've seen? And then just a bit on renewal behavior in terms of what it's like buying more licenses, Mohapad, so just kind of how is the kind of renewal conversation in 3Q compared to what you saw at the beginning of the year?

Speaker 2

Yes. Look, the last quarter was a very strong quarter for public sector, for our federal business, Actually, in the UK and in the United States. And that was really because the federal businesses are Looking at the platform in a unique way, and we offer some really incredible capabilities around document understanding, connecting that to attended automation, Focusing on how citizens can improve EBIT. So we've seen us make a market move in public sector. That also is based on talent and the talent we've brought into that environment and how we've driven that talent.

Speaker 2

And now we actually have some really good industry based activity In public sector, in revenue services, in DoD, in customs, in USDA, that actually can really help all of our public sector Activity globally. When you look at traditional markets like when you look at more traditional markets, Telcos, CPG companies, manufacturing, retail companies, they're all driving efficiencies and driving efficiencies in retail. It's how fast can I open up stores, how fast can get employees on, how do I make certain, my price points are valid and my price points are real and I don't have any price point issues between stores and so on? And actually, automation really Some significantly capabilities in that, but we play a significant role. If you look at capital intensive telcos, It's all about efficiencies and how can I get competitive advantage efficiencies because my markets are mature and the only way I actually get growth is by Beating my competition and moving subscribers from 1 provider to another provider?

Speaker 2

And in that space, we are playing pretty well. So It's variable in which industries you're in. It's variable in terms of how they see growth and where they're investing. But there's one common theme across the board and that's efficiencies. With renewals, it gives us an opportunity to drive the platform, to drive the platform earlier, to actually Here's the value.

Speaker 2

Let's work on NorthStar with you. Let's get in to office. We've got an SAP transformation. We can help you with that as well. Let us bring one of our big Global SI is to showcase the transformation, and that really helps drive a different cadence with renewals.

Speaker 2

It's not just about renewing what you've already got, it's about renewing what And now you want to add more business value in the future. And I think we're incredibly good at that right now.

Speaker 5

That's super clear. And then just, Ashim, it's a quick one for you. I mean, the incremental margins in the quarter, they're really good. They've been really good all year. I guess, If you can remind us just some of the puts and takes we should keep in mind around how to think about the margin profile in kind of in the out years?

Speaker 5

Thanks again.

Speaker 4

Look, I would refer you back to our Investor Day pitch last year where we talked about long term operating Just our long term operating model there. We're really pleased with the execution on the margin front. We've been ahead of that curve in terms of just And we feel really good about our ability to operate with discipline and efficiency while still investing in growth for the company.

Operator

That is all the time we have for questions. I'd like to turn the call back to management for closing remarks. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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