Q3 2024 UiPath Inc Earnings Call
Greetings and welcome to the you Ipass third quarter fiscal 2024 financial results Conference call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce Kelsey turcotte.
Senior Vice President of Investor Relations for U I pass. Thank you you may begin.
Good afternoon, and thank you for joining us today to review U Ipass third quarter 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 Dino you Ipass cofounder and co Chief Executive Officer, Rob Enslin, Co Chief Executive Officer, and Ashish Gupta, Chief Financial Officer, Rob will start the discussion and then turn the call over to Daniel after that as Jim will review our results and provide guidance and then we'll open the call for questions.
Our earnings press release and financial supplemental materials are posted on the you Ipass Investor Relations website IR Dot you I pack Dot com. These materials include GAAP to non-GAAP reconciliations are available we will be discussing non-GAAP metrics on today's call.
This 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 fourth quarter of fiscal 2020 for actual results may differ materially from those expressed in the forward looking statements due to many factors and therefore investors should not place undue reliance on these.
Shipments for a discussion of the material risks and uncertainties that could affect our actual results. Please refer to our annual report on Form 10-K for the year ended January 31st 2023 and.
And our subsequent reports filed with the SEC, including our quarterly report on Form 10-Q for the period ended October 31st 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.
I would also like to highlight that this webcast are being accompanied by slides, 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.
Thank you Kelsey good afternoon, everyone. Thanks for joining us our third quarter results underscore the compelling value I intend automation platform delivers for our customers and the strength of our business model for Dakota. They are all grew 24% to $1 $37 billion.
Driven by a third quarter net new IRR of $17 million.
Well revenue was $326 million up 24%.
We continued 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 million.
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 it.
And 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 a momentum at Fort six annual user conference, where we hosted more than 3000 games, including automation practitioners industry visionaries key customer decision.
And Mike as well.
We also launched an old ruble and overall you iPad aten.
All awards program, recognizing your iPad customers, who embody what it means to be a leader in AI at work.
I must say I've been super energized about the tangible value of 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 third quarter deals over $1 million in IRR.
Customers with $1 million or more in a R grew 31% to 264.
While customers with $100000 or more in IRR increase the 1974.
Industry verticals, they shouldn't 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 a marketplace.
But I do service management software user provisioning, a two way match invoice processing for Cooper and ACP among some of the most popular downloads.
Well, we saw broad based strength in net new IRR across industries. This quarter there were a couple of standouts.
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 and play experience.
<unk> mission readiness and achieve breakthrough outcomes.
Customer highlights included veteran Affairs Coast Guard. The Iras that are part of Homeland Security. We're also working with the United States Department of Agriculture to support a future of work initiative, delivering a new era of citizen and employee experiences.
Using a full platform USAA is driving mission impactful enterprise automation across the HR finance and it departments.
Graeme also features a digital assistant on every USDA employee desktop driving personal productivity for approximately 100000 employees.
Momentum continues in financial services, and healthcare, where automation delivered considerable value. This includes one of our top 25 customers a large nonprofit health system in the United States.
Taking a deep look at the 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. They journey started in 2018 with core PAA over the last several years that expanded to attended automation document understanding tastes sweet and process mining.
To date, they have achieved a return of it.
Asthma of over $250 million.
And this quarter in one of our largest deals in company history. They expanded to the full platform. They worked great a centralized enterprise automation service department, but the mandate from the EVP sponsors to deliver automation across the entire enterprise.
They also in the process of developing use cases for communications mining and you iPad apps.
Customers standardize on our AI powered automation platform to deliver transformational outcomes that streamline processes eliminate errors.
Well the enterprise quality execution needed to succeed in today's environment.
A great example is Johnson controls.
Starting the automation journey in 2021 with core RPI. They adopted the full your iPad platform as they work to consolidate the automation program to one end to end solution.
They also plan to leverage AI.
<unk> like document understanding taste, sweet and test mining to drive automation across the entire business.
And another example is the department of work and pensions.
The United Kingdoms largest public service department, they have been using co or P. A since 2018 to out.
Their most vulnerable citizens improve their quality of life by automating millions of service and support claims each year.
Since the first deployment that has scaled to over 1000 robots in production and save 3.1 million hours to date.
During the quarter they expanded to the full platform as they look to harness AI and integrate document understanding proceeds mining and communications mining into the automation program to improve citizen services.
Ive operational efficient efficiency and increased cost saving and capacity creation.
We also landing new logos, which are adopting multiple platform products and their first purchase that's tenable and kik custom products.
And the first phase of deployment pick intense deleverage unattended robots and document understanding to drive efficiency across the finance Department.
With the long term goal of scaling automation across the entire enterprise.
Our value based go to market to North Star.
Also continues to drive deeper customer conversations.
We strategically position the differentiated and actionable benefits of AI powered automation.
Great exactly sobieski, a customer since 2020, we created a northstar roadmap help them maximize their return on investment of their automation program and as a result, <unk> expanded the automation footprint in the quarter to streamline processes in finance merchandising and supply chain and to improve their <unk>.
Bring process in stores.
They also investigating how they may be able to use our platform and the SAP.
Transformation journey.
Yeah.
Turning to our S E T partnership while in the early stages. We are excited about the collaboration between our teams I recently joined Scott Russell If he executive Board member customer success to cohost. They sales leadership meeting and continue to see success in signing new logos from this partnership.
Key one for me the honest group some time in Australia, and Australia and legend, the Australia produced biscuits and snack food the honest groups elected the your iPad platform to optimize business processes and reduce operating costs.
The initial focus will be on automating end to end sales OTA and invoice processing.
We also announced an expanded partnership with Deloitte.
What of Sap's largest and most strategic partners Deloitte Williams said that your iPad AI powered business automation platform into the S N service delivery platform.
Powering the next generation of AAP transformations.
These strategic relationships are powerful for our customers, but they also drive increased engagement with GSI, it's in our partner ecosystem.
That has never been more invested in and they are right now at 46, we hosted an impactful session for more than 750 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 GSI 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.
For example.
Working with Deloitte and Australia and 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 it has data accuracy.
To further accelerate the automation program they adopt the test mining and recorded analyze processes and accelerate scoping activities.
Yeah.
Broader 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 seeming, let's say integrate Jared of AI directly into their U I pass studio and studio with automation.
And the beauty of the AI powered business automation platform on the Google cloud marketplace early 2024.
In summary.
Third quarter results.
Are another proof point of our commitment to delivering strong topline 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 the relentless focus on unlocking value for our customers day in and day.
Yeah.
And with that I'll turn the call over to Daniel.
Okay.
Thanks, Rob.
Good afternoon, everyone. Thanks for joining us.
Sure Mark is that an inflection point as the market leading tool that enables organizations to derive actionable value from AI. We believe this is a huge opportunity for us.
That's what it was.
We introduced our latest blocks were released 2023, both debt unbelievable scores of new capabilities that seamlessly without.
The potential of AI into tangible actions to drive business outcomes for our customers.
From my perspective, one of the most exciting announcements a corridor, what's you wipe out auto pilot.
Oh power.
Our capabilities for developers.
And all these are knowledge workers designed to enhance the user experience across the U I pass block four.
We expect autopilot, which is based on generative AI to bring our unique capabilities RPI AP automation document understanding and specialized AI.
<unk> cool enterprise grade end to end process automation.
Okay pilot for studio.
We intended to help developers across Q levels build automation faster by leveraging natural language. This creep so to generate automation workflows.
For less technical developers. This is a great Tucker tool why isn't the best developer will benefit from increased productivity.
So pilots for test we are absolutely every phase of the testing lifecycle from generation of players surfacing insights from the types of results.
Finally, as the companion for business users, we anticipate that autopilot every work will help users create a news.
But solar lives daily.
The micro to myself on the fly.
We're also ship exciting announcement around intelligent document processing for introducing our next generation experience powered by actively logging and generative at our magnesium IDP pardon me almost anyone.
Specialized models for specific domains.
Document lives and our internal benchmarking shows that all with next Gen IV picks at Expedia.
Yes, absolutely modeled because at any time by up to 80% from a week to a day for complex scenarios 1002 minutes for <unk>.
Similar 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.
Automate the Midland inspection process.
They have achieved over 12 million goes and Huntington 63000 hours in savings to date.
We've seen levels console.
During the quarter they expanded the UA box deployment greencore protest sweep into their automation journey with the goal of saving over 70 million goes a year.
Yeah.
We are humbled by third party recognition of our achievements, including I B C markets. Okay.
Worldwide intelligent document processing, what I D. P. 2023 'twenty 'twenty four vendor assessment, where you eyeball was named a leader in IBP for all with broad market leadership.
IBP capabilities, and you eyeball document understanding and communications mining integrated into our broader enterprise all coming from block four.
Innovation is the cornerstone of our strategy and we challenge ourselves everyday to deliver market leading capabilities with a customer first mindset.
I spend a lot of time with our teams in both the root cause looming out this quarter.
I'm energized by our cutting edge product roadmap focused on transforming enterprise automation by harnessing the next generation of technologies.
Together with our World class team of engineers I am excited to dedicate more time browsing you Ipof novation of jumbo transition into my new chief operational whose sole role this window.
With that I will turn it over to assume.
Thank you Daniel and good afternoon, everyone unless otherwise indicated I will be discussing results on a non-GAAP basis, and all growth rates are year over year.
Turning to the third quarter are our totaled 1.3 dollars $78 billion, an increase of 24% driven by net new <unk> of $70 million, excluding the FX tailwind net new air are totaled $69 million.
We ended the quarter with 10865 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 third quarter was 121%.
Normalizing for FX dollar based net retention rate was 123%.
Dollar based gross retention of 97% continues to be best in class.
Revenue grew to $326 million, an increase of 24% year over year.
Normalizing for FX, which was an approximately $3 million tailwind revenue grew 23%.
Remaining performance obligations increased to $995 million up 31% year over year.
Normalizing for FX, which was an approximately $16 million tailwind or P. O grew 29%.
Current RPI increased to $599 million.
Turning to expenses, we delivered a third 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 2020 for gross margins to be approximately 86%.
Third quarter operating expenses were $240 million, highlighting the leverage in our business and our commitment to expense management and operating discipline.
GAAP operating loss of $56 million included $96 million of stock based compensation.
non-GAAP operating income was $44 million, resulting in a third quarter non-GAAP operating margin of 13%.
Third quarter non-GAAP adjusted free cash flow was $44 million.
As of October 31, we had $1 $8 billion in cash cash equivalents and marketable securities and no debt.
Under our 500 up under our $500 million buyback program, which we announced in September 6th we repurchased three 2 million shares of our class a common stock at an average price of $16 26 through October 31.
November 1st under our can be five one plan, we repurchased an additional $1 7 million shares at an average price of $17 38 three.
Through November 28 2023.
Now, let me turn to guidance, which assumes the global macroeconomic environment continues to be variable.
For the fiscal fourth quarter 2024, we expect revenue in the range of $381 million to $386 million.
Or are in the range of 1.450 billion to 1.455 billion non-GAAP operating income to be approximately $78 million and we expect fourth quarter basic share count to be approximately 567 million shares in.
And finally, we expect fiscal year 2024, non-GAAP adjusted free cash flow of more than $250 million.
Thank you for joining us today, and we look forward to speaking with many of you during the quarter with that I will now turn the call over to the operator operator, please poll for questions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
We'd like to ask a question you May press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the snarky.
Please limit yourself to one question and one follow up so we may get to everyone's questions.
Our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed with your question.
Great. Thank you you got to know him from 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.
You know one of the few companies that sort of uniquely positioned between traditional automation and generative AI technologies, where do you see customers kind of take the dollars from what they're spending on these AI technologies, whether that's within the product.
Or is that you offer or more broadly.
Anything that's kind of coming out of your customer conversations in terms of how spend this getting reallocated.
If they are.
Yeah. Good question, you know what I would say is that when customers are when customers are looking at spending with us and the AI. They eye story and a connection to automation connection really fits well to a customer's money when they invest in in many cases, the investments are coming out of that.
Business case and business value that we produce in an old store and are able to show the efficiencies in how to game. So they can invest in innovation and they see us as an innovation leader today with AI and innovation combined with Oh.
AI powered platform so.
It does feel like it's been taken away from one group to another I feel it's really driven by the business case, we were able to drive with C level suites and now we focus on industry solutions and now we've connected those two to the buying cycle with customers.
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 have your forward contracts in the quarter, 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 so it's that kind of continue into next year anything that you can share there would be great.
I would just highlight two points first is we are going to continue to invest in our sales team, especially in our sales capacity, especially as we head into next year and then the second is if you recall. We also are dealing with the we also have the reallocation of our software expenses, So first through third quarter.
You'll see you'll see sales and marketing versus G&A.
Bit lopsided, and which will be caught up in the fourth quarter.
Our next question comes from the line of Mark Murphy with Jpmorgan. Please proceed with your question.
Yeah. Thank you so much and I'll add my congrats.
So Rob I'll take it back to the analyst day, just over a year ago. You had mentioned there that every tech company of course has shelf where in that.
You Ipass does as well.
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 maybe hitting a level where they.
They might need to replenish and just start moving forward a bit faster as we get into next year, then I have a quick follow up.
Yeah, Mark I looked at it.
As I said earlier on and you know companies deal with shelf way, we feel good that our platform actually helps us move customers from not only bought into the broader platform as they focus on efficiencies. This marketplace that we're dealing with today Sydney benefits our efficiencies in your business model. So we feel really good that we are able to take customers to the new.
X level without platforming out C level our activity.
Okay.
And a shame when we look at it arithmetically the deceleration in the air or has been moderating which of course is great to see it it looks like it could step down a bit 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 either.
Try to be mindful of the law of large numbers in some of the some of the macro Oh unknowns that are out there.
Yeah, I would just say mark were really pleased with our performance and the team's execution. We're focused on we're focused on closing out.
Good year end here and the teams are really focused on that and we look at our fourth quarter guidance, just putting the right prudence and the right macroeconomic variability included in our guidance and we'll update as we get closer to next year.
Yeah.
Our next question comes from the line of Kirk Metro with Evercore. Please proceed with your question.
Okay.
Hi, Thanks for taking the question and congratulations on a very strong quarter. This is Charles on for Kirk in your prepared remarks, you mentioned that large deals landed extremely strong and 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 that.
This trend to continue looking ahead to next quarter and next year essentially one I'll do you believe that we're close to a more stabilized macro spending environment or are you still seeing some broader choppiness out there. Thank you.
Yeah, I mean, we.
We feel really good about how our teams all adore.
Adopting all the changes that we've made and how they are connecting with customers and the relationships, we're having with customers. They expansion is really in many ways driven to our growth products with all the AI communication that's happening in the market. It 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 no stock quite a bit and shying away customers can really look at processes and tasks and understand how to drive value with it with the automation platform. So.
Folks talk about digital transformation and connect we believe that AI powered automation is really helping digital transformation with our with our customer base and our larger customers and we're pretty happy with.
The net new companies that we've acquired over the last you know.
The quality of them you really you look at the these kind of these are good companies that 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 and in this environment.
Alright, thank you.
Yeah.
Our next question comes from the line of Brad Sills with Bank of America. Please proceed with your question.
Oh, great. Thank you so much I wanted to ask a question around some of the departmental expansion. You've seen are you you talked about industries here I think banking and our public sector sounded good but are you finding that you're you're seeing now with the uplift in expansion activity here within our our that.
But you're getting outside of finance and accounting into I T. H R. You know some of these other use cases in the departments.
Yeah, So I would say we have broad.
We have brought a we've seen broad industry activity with manufacturing with our retail with fashion retail with grocery hard goods retail.
As we said, we feel really positive about public sector and public sector globally, and we also see.
Significant amount of activity outside of the finance office in procurement.
And then in the I T organization. So it's much more broad based and we feel really good about where we are really focused on on that.
Great and then one other forward conference if I could please if you could just remind us how important that event is for you know lead lead management and moving deals through the pipeline and how do you feel coming out of the conference this year versus years past in terms of momentum. Thank you.
When you got two years' experience and that's what I would tell you I was super excited to see the quality of customers and the quality of the event and the quality of the discussions that we had if you look at the comps the companies can have on stage with us and what they were doing with US. These are really trends transformational. If you look at the partners partnerships with <unk>.
And Deloitte on stage with US. This was transformation we spoke about 750 partners that we're aligning around the channel strategy. So we feel good.
Good, though we actually for it is actually a catalyst event to move your iPad helped our branding position us in the C suite and make a difference and it certainly does help our pipeline as well.
Our next question comes from the line of Ramon <unk> with Barclays.
Please proceed with your question.
Thank you congrats from me as well.
Firstly I'd like more of a bigger picture question like if you think about the.
And the different areas of strength that you saw this quarter and like can you specifically speak a little bit about what you saw in test drove them because that's what we hear from our checks and.
One of the areas, where especially in the U S. U P equal system that 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 our E. P.
Yeah.
You know it's.
So if I look at the broader picture. If you look at if you look at the market today, you know as I said early on customers are looking for ways to drive efficiencies to fund other activity and you know there's not a significant amount of new business models that are driving growth through that so that really helps us significantly.
And obviously that fits swelling to ACP I'll focus with their transformation objectives. The rise program, which is an ongoing program and it's you know I believe that we've actually moved the needle significantly where they say P. M with the S&P activity between the different sales organizations and we are involved in many transformed.
Asian discussions with ECP and GSA partner GSI partners, and you and we will see more of that test is a key a key part of that because it has an incredible value.
Value proposition, which allows customers to drive not only you know non interest savings, but time benefits and really automation of testing is one of the biggest challenges customers having in our in our biggest ETP environment and we feel we do an excellent job, helping customers achieve significant beat a significant test.
Which obviously helped mitigate any risks associated with our Oh go lives.
Yeah, Okay perfect.
Yes.
Then one price here and as you think about like like it doesn't look like the demand trends are stable and are we kind of could potentially look for better times ahead.
Obviously, you know we have the best.
And that's yeah. Our addition for a few quarters now as well how are you and you've got but also you guys have been very disciplined around our cost and margins, but at some point you need to think about lead times received people et cetera, how do you think about that that's.
That balances all of like getting ready for eventually better times versus where you are at the moment. What are you seeing in terms of productivity gains perceived etcetera. For example to kind of all kind of drive this going forward. Thank you.
Yeah, I mean, I would start with we have a very powerful business model Rhino strong gross margins that allows us to invest while still generate cash.
And margins and so we are we have been investing or 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 where we see the right returns and the right investments and Rob and the team looks at that.
An ongoing basis, and we do as a leadership team.
At the same time, we also are looking for efficiencies. So together with that I think where we're constantly in investment mode. We feel we feel very positive about our value offering and we.
We feel like we can both drive that investment, while still generate cash and margins.
Our next question comes from the line of Terry Tillman with true. Please proceed with your question.
Yeah. Congrats from me on the on the quarterly results first of all I guess, Rob maybe the first question is.
They've been pretty simple here, but northstar roadmap it seemed like a no brainer like how much of your customer base or at least your larger enterprises have you actually unleashed the Northstar roadmaps 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 product or packaging to create less inertia to move all of them with the platform and then I had a follow up regime.
Sure.
Great questions.
So I would I would say.
You know, we we we are doing a lot around pricing and packaging and obviously pricing our pricing packaging solutions and it's a constant.
Upgrade I would say that but you've got to be very careful about how you actually bring that into the market and we're focused on really simplifying SK use and so making it very simple for customers to purchase and also make it simple for customers to mix and match.
Solution sets.
So but in a way that's very simple so that they can actually expand with less friction and we do we're doing significantly more of that north star at North Star is a.
He is a combination of a great value based tool that has to be connected to the C. Suite you have to have sellers that are able to communicate that and as we enable our organization more when we get more references we are able to scale more and continue to scale. The organization. So there's still plenty of opportunity for us to continue driving driving that and continue to work on.
And I'll start with the with the organization.
That's that's great. Thank you for that Robin I guess assume in terms of you know all the work on the go to market side. This year is there potentially.
Further drift and NR or could it actually improve from here I mean, its already best in class, but I'm just kind of curious how you could see in our our trends potentially with more of the harvesting of all this work on the go to market side. Thank you.
I'd just say we continue to be pleased with where we are and how we're executing and we're gonna look forward to closing out fourth quarter and we'll provide more updates.
Next year.
Our next question comes from the line of Fred Meyer.
With Macquarie. Please proceed with your question.
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 product being integrated throughout your portfolio would you speak out looking for it to.
Let me see what you can do there, but I wanted to take a I guess a bigger picture look at the longer term outlook of the market considering some of the impressive results exceed autonomous agents using for example, like GPT for what do you envision tax et cetera.
I'm curious.
I'm with you I path as real estate and one of the original autonomous even companies with your tenants.
Attended RPI, how do you think about the market evolution over time with each base or agent like functionality being built using a general debate.
Well I think.
That's the direction in the market, but we are seeing right now where one or both of them once agents pool.
Oh no no.
Our approach.
So that plus automation is the.
The thing that drives the biggest thought would come through our cost per watt.
This is what we are seeing.
A lot of our customers.
After the initial well it will be a pause or al how are you.
Tell me.
My uncle makes them they realize that they need powerful automation plus four.
Two harbors the power back.
And going forward on a longer term basis.
Where do you like all in the.
One of the best positioned to build the next generation foundational monzo that understand the processes that screams and documents type of multimodal.
It is built in in order to drive automation. So it's so to me it's clear that the.
The world is going into them into that direction. Then again, we are really in a very good position to take advantage of it.
Thank you for that I'm looking forward to having internet as a service to be able to help out honestly and everything.
I hope also.
Related to the topic here of generative consistently heard feedback about the difficulty of organizing ones data within an enterprise in a way that's useful and so I'm curious what you're hearing from your customers, how they're beginning to and attempting to approach their own generators.
Whether you Ipass automation platform is really able to help customers more holistically across the board for children.
Yeah actually this is lew one of flu.
The major use cases, where automation is used right now in order to find today come from other labs or even specialized.
And it's.
Frankly, one of the hot discussion points with our partners around the world.
We have an interesting discussions in Japan and in U S.
With companies like Accenture Deloitte.
Really interested in pool, how big can leverage automation to clean the data and to accelerate.
That's been draining the flu.
Hello lengths and specialized.
Yeah.
Our next question comes from the line of City County, Grimes with Mizuho. Please proceed with your question.
Thank you.
So it's good to see this new era or bounce back. So I you speak with your customer what do you think the.
By spending train would be next year well in in terms of in priority for automation spending.
Yeah, I mean, we've done we've looked at different analysts different marketing.
Many analysts to tell you that they see.
Cloud or the current data and cyber and automation is the key trends and in terms of spending next year, but I would caution and say you know customers though.
As I said early 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 a way that we actually have a.
Approach customers I don't see a significant change in in that spending I do think that customers are going to look to see how AI and AI automation engine AI can help them.
And to help them drive more efficiency and deep levels of efficiency 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 what they are approaching in a deep way, what's it connecting meaningful inputs and outputs in companies around document and social communication emails into these proceeds in order to drive real process orchestration at a different level.
Thank you and I've seen a falloff if I captured your total customer count it seems like it does come down this quarter, but you guys also had a pretty good you know on your enterprise segment.
Oh spending so wondering like was there anything different you saw in different segments like small versus make to lodge the segment.
Yeah look we're very pleased with how our enterprise segment is performing the.
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 of our churned customers, which Rob mentioned also earlier overall I think our strategy remains consistent we are 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.
Great. Thanks for the color.
Our next question comes from the line of Michael <unk> with Keybanc. Please proceed with your question.
Hey, guys congrats on a solid execution.
So two questions one where.
Where are we in terms of the shortening of the deployment time for the average, but it seems like it it already improved.
Does the rollout of autopilot help shorten that time, even further and then I have a poll for Ashish.
Thanks.
This is this is always one of our major product focus on how can we be.
Sure.
<unk> core for our customers wherever we're already seeing with our auto part it looks like maybe the cause.
It is in private preview some really good results with the initial setup a few hundreds of customers.
Sure.
No product so.
Yeah, I would say that.
This is going to be a significant driver for adoption.
And both for advanced developers.
But they will get the Caribbean piece of productivity.
So she is going to go overboard.
We'll get started.
Also I would like to mention that our training our specialized documents understanding and communication modules using junior high.
<unk> has already proven this is actually in production already I mean, it's been proven to us to deploy.
Deployment quite a bit.
Thanks, Daniel and then Ashish on the.
<unk>, it's great to see it having stabilized.
As reported basis, but they do go down another two points.
As it did last quarter on an FX adjusted basis. So so what what are the puts and takes there.
Working in trying to actually increasing at all.
Yeah, I mean, I look at our dollar based net retention adjusted for FX, It's 123%, which at our scale. We're very pleased with and continues to be in a best in class territory.
There always be a little bit of a law of large numbers and of course every quarter as deal mix will change, but overall, we're really pleased with the strategy I think we've had several marquee deals in the quarter and the penetration in the sale of the platform as Rob mentioned, we're making we continue to make really good progress on and we see very.
Good strong performance in India in the Enterprise segment, particularly in North America, and 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 on the.
Customer quality, though that and the customer quality in the quarter.
Yeah.
Our next question comes from the line of Scott Berg with Needham <unk> Company. Please proceed with your question.
Hi, everyone nice quarter here, thanks for taking my questions.
Your net new <unk> was up year over year for the first time I believe.
Fourth quarter fiscal 'twenty two.
So it's a nice change there on the positive side I think most of the questions have been on your execution within the quarter novel commentary from the demand in the market are you seeing any changes around your customers or the environment more mid market enterprises, because you mentioned the down market a couple of different times in the macro impact there, but are you seeing any.
Any sort of positive change upward in demand from whether it's existing customers or net new.
Yeah, I mean, I do definitely see.
As the main positive conversations in the market.
Like we have in a significant seat at the table with the AI open AI chat GPT kind of discussion that's been taking place and plus having the platform has allowed us to see little C level conversations we have customers now.
That are really calling us to actually have discussions we they've been using <unk> since 2018, 2019, and they feel like there's an opportunity to expand it and not getting all of that they're not getting as much value as they believe they could get out of it and those conversations are taking place and we were able to actually showcased proof points on how to do this so yeah definitely more Pos.
And definitely feel good about the discussion on how we can help customers and how we are more relevant to the business discussion.
Got it helpful. And then Ashish your current our appeal metrics growth rate accelerated pretty meaningfully quarter over quarter was there any one time anomalies I dunno early renewals are something that impacted that abnormally in the quarter was that a pretty clean calculation.
Thank you.
No no major abnormalities like early renewals et cetera, I think I had mentioned we had several marquee deals in the quarter and a record number of deals above $1 million for a third quarter and so it's just it's execution and really good deal quality, that's driving that metric.
Our next question comes from the line of Michael <unk> with Wells Fargo. Please proceed with your question.
Hey, great. Thanks for taking the question two.
Two part I'll, just ask upfront Rob given investments you you mentioned in reaching the C. Suite wondering if you could provide us with your perspective around to help enterprise customers are approaching I T budget growth into next year and automation as a part of that and then as a second part for OSM can you comment on the visibility you have into <unk>.
Our Q forecasts currently and any swing factors for us to consider.
In terms of potential upside there. Thank you.
Yeah, Michael I'll take it I shouldn't go later.
Yeah.
Because we because we are having these conversations in the boardroom customer Congress customer conversations much why the C level suite, we much earlier in the budget cycles than we've previously paid and we actually much more important in the budget cycles than I believe we've been previously and I think there's a couple of.
Really key points stand out right I industry, how 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 systems integrators and way, how they've come along and in support of our support of US the messaging around ACP has driven driven well end the platform proof points around you know do you and you know I announced the customer that had $250 million.
Savings in my earnings script. This is what's really are allowing us to participate and so we feel like we are a meaningful part of where the budgets again next year either.
Everybody is looking at how tight state budgets are and trying to find out how to move.
From one pocket to another pocket on the innovation side and we are definitely on the innovation side of customers thinking and then I'll hand, it over to us.
Yeah. 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 at just executing the teams are focused on executing a good into yearend yearend them close to the year and that's what we're focused on and that's what I would comment on that.
Our next question comes from the line of Bryan Bergin with TD Cowen. Please proceed with your question.
This is actually Jared on for Brian, but in terms of the competitive environment any changes from what you're seeing from Microsoft service now or automation anywhere.
Yeah.
And I have a look at if I look at service that we don't see them in in many opportunities what.
I will tell you are a service not connect is the one of the most.
He is the most popular downloaded connected T. T. I passed that we continue to partner with them.
Partnership with Microsoft or a co pilot and out of pilot the discussions we're having with them continues to be robust and we very happy with where we going with Microsoft and that partnership and I think for a lot of the.
Traditional opioid vendors are feel that we are now we've broadened our skill system and what you're offering we don't see them that often anymore.
Got it and then do you have any data points on how the new bundled pricing packages is increasing revenue uplift per client or anything around Lebron rep. Excuse me revenue uplift from the reduction of Skus as part of the sales refresh.
I don't have specific that we can point to now I mean, we were looking at you know the results, there'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 you know I would just simply say easier for customers to understand easier for them to move desk.
Only they definitely like how they're able to use auto AI units across multiple products and interchange them as they as they think of new use cases to advance their business as well.
Our next question comes from the line of Alex Zukin with Wolfe Research. Please proceed with your question.
Hey, guys. This isn't broke off route because you came in that thanks for taking the question and congrats on the nice results I guess this one might be for you. Just if we were to unpack a little bit more color just some stuff you saw in the quarter in terms of just.
Either like certain verticals, where you saw I know you've mentioned around like the variable demand, but just kind of comparing some of the macro maybe by vertical basis, if something's got improved or were 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 more parts or just kind of how are you.
Kind of a new conversation in <unk> compared to what you saw at the beginning of the year.
Yeah.
Okay.
The last quarter was a very strong quarter for public sector for our federal business and.
Actually in the U K and in the United States and that was really because you know the federal businesses or looking at the platform and a unique way and we also saw some really incredible capabilities around document understanding connecting that to attended automation focusing on how citizens can improve their business.
So we've seen we've seen us make a market or a market move in public sector.
These are based on talent and the talent, we brought into that environment and how we've driven that talent and now we actually have some really good industry based activity in public sector in revenue services in D O D and customs and USDA that actually can really help all of our public sector activity globally.
You know when you look at when you look at traditional markets like.
When you look at traditional more traditional markets telcos CPG companies manufacturing retail companies, they're all driving efficiencies and driving efficiencies in retail as you know how fast can I open up stores, how fast can I get employees on how to mine makes it in my price points are all valid and price points are real and I'm I don't have any price point issues between stores.
So and actually automation really drive some significantly capabilities in and that's where we play a significant role if you look at capital intensive telcos and it's all about efficiencies and how can I get competitive advantage of efficiencies because my market, so mature and the only way to actually get growth is by.
Competing my competition and moving subscribers from one provider to another provider and in that space, we are playing pretty well. So it's variable in in in which industries you're in its variable in terms of how they see growth and where they're investing but there's one one common theme across the board and that's efficiencies and went through a new.
It also gives us an opportunity to drive the platform to drive the platform earlier to actually start having the discussions with customers. Most most many months. So many quarters earlier in terms of why I moved to the platform user value, let's work on North Star with you, let's getting golfers who got in ACP transformation. We can help you with that as well let us.
Spring one of our big Global Air size to showcase the transformation and that really helps drive a different cadence with renewals is not just about renewing what you've already got it sputtering eating what you wanted to do in the future and how do you want to add more business value in the future and I think we incredibly good at that right now.
That's super clear and then just assume it's a quick one for you I mean, the incremental margins in the quarter. They were really good at it didn't really hit all year I guess, just could you remind us just some of the puts and takes we should keep in mind around how to think about the margin profile.
In the out years, thanks again.
Luckily, we I would refer you back to our Investor day pitch.
Last year, where we talked about long term operating model just our long term operating model. There, we're really pleased with the execution on the margin front.
We've we've been ahead of that curve in terms of just execution and we feel really good about that our ability to operate with discipline and efficiency, while still investing in growth for the company.
That is all the time, we have for questions I'd like to turn the call back to management for closing remarks, Yeah. I just wanted to say. Thank you. Thank you to all of you for all your support it's great to have you all on the call today happy holidays to you and your family you enjoy a great time Hello household.
Yeah.
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.
Yeah.