UiPath, Inc. (PATH) Q1 2023 Earnings Call Transcript

Greetings. Welcome to the UiPath First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I would now like to turn the conference over to your host, Kelsey Turcotte, Senior Vice President of Investor Relations for UiPath. Kelsey, you may begin.

Good afternoon, and thank you for joining us today to review UiPath's first quarter fiscal 2023 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 Dines, UiPath Co-Founder and Co-Chief Executive Officer; Rob Enslin, Co-Chief Executive Officer; and Ashim Gupta, Chief Financial Officer. We will open with prepared remarks followed by a Q&A session. Our earnings press release and financial supplemental materials are posted on the UiPath Investor Relations website, ir.uipath.com. These materials include GAAP to non-GAAP reconciliations. We will be discussing non-GAAP metrics on today's call. This afternoon's call includes forward-looking statements about the impact of FedRAMP authorization, our ability to drive growth and operational efficiency and our financial guidance for the second fiscal quarter and fiscal year-end 2023. 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 statements. 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 fiscal year ended January 31, 2022, and our other reports filed with the SEC, including our quarterly report on Form 10-Q for the quarterly period ended April 30, 2022, 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 like to highlight that this webcast is 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. Before I turn the call over to Daniel, I'd like to inform you we will be holding our 2022 Investor Day during our FORWARD IV user conference on Tuesday, September 27 at the Venetian Hotel in Las Vegas starting at noon Pacific Time. Please save the date. Invitations with registration information will be forthcoming. Now, I'd like to hand the call to Daniel.

Thank you, Kelsey, and good afternoon, everyone. Thank you for joining us. I'd like to start by thanking the UiPath team for their hard work and dedication to our customers during this turbulent time. I'm pleased that our first quarter results exceeded expectations. We reported ARR of $977 million, which grew 50% year-over-year. Net new ARR was $52 million, net of a $5.5 million due to Russian sanctions. When we provided guidance in late March, we knew it would be a choppy quarter, particularly in Europe, given the ongoing geopolitical situation and macroeconomic environment. At the same time, both prospects and existing accounts tell us that automation is a long-term solution to this kind of volatility, which leaves us very optimistic about the business long term. This year, we expect to cross the $1 billion mark in both ARR and revenue. And as we look ahead, we have aspirations to be multiples of the size we are today, which is why we have brought together a global team that has scaled technology businesses of size; their leadership and experience built upon our current foundation will help drive the next chapter of sustained profitable growth at UiPath. Choppy macro environments typically reveal areas that can be improved. To that end, the team is focused on simplifying our go-to-market approach, starting with an alignment that will result in better market segmentation, higher sales productivity, and best-in-class customer experience and outcomes. We will be scaling through our emerging enterprise teams, which are more cost-effective while simultaneously increasing our presence with key accounts where the expansion opportunities are significant and where we haven't had enough dedicated attention. Chris Weber, our new Chief Business Officer, is already guiding teams to reach higher to C-level executives and instilling even better operational rigor on deal execution while reducing bureaucracy and organizational complexity. Our market opportunity continues to be significant as the need for agility in working organizations is only increasing. We continue to win in the market, given the measurable return on investment we create for our customers and the breadth and depth of our platform. I have never felt more confident in the leadership team, the direction of the company, and our ability to build operating leverage while continuing to win in this large market. Turning back to the quarter, we continue to see broad adoption across industries, ending April with more than 10,330 customers including new logos such as Bridgestone Americas, Korea Investment Savings Bank, Datto, Udemy, and Virtua. We also had great competitive wins in this quarter with new logos like Zalis and DocuSign, which selected the UiPath platform, including the UiPath test suite to accelerate the time to value for new automations and UiPath Integration Service to combine the power of both UI automation and API integrations in a single workflow. We now have 1,574 customers that accounted for at least $1,000 in ARR on an annual basis. This includes 168 customers with annual ARR over $1 million. During the quarter, a global financial services and insurance company chose us to standardize on our entire platform while phasing out a competitor. They are implementing automation across lines of business and plan to use document understanding, AI/ML, and the test suite as well as scale up citizen development. They have a corporate initiative to remove $100 million in costs by 2025 and see automation as instrumental in achieving this goal. We consistently hear from customers that our end-to-end platform, focused on innovation and our vision for the future of automation, are important differentiators for UiPath and key to winning in the market. In the recent Forrester RPA inquiry spotlight 2022, between February 2020 and December 2021, Forrester analysts received the most inquiries about UiPath, 2.7 times more than the next vendor, while 72% of total conversations were focused on automation platforms. We continue to deliver on our promise to make platform deployment easier and faster with the introduction of 22.4, our most recent platform release. A few highlights include the general availability of automation cloud robots with two SaaS offerings, a VM automation cloud robot created on-demand in automation cloud, providing unattended robots and serverless automation cloud robots, a pool of robots that we run selected automation jobs on demand, expanded integration options in our integration service, controls and templates to streamline app development, new citizen developer access to AI-powered tools like Forms AI, document understanding, and test capture, security and compliance upgrades that include every UiPath service now in scope for SOX, and automation cloud UiPath station, as well as support for Mac expansion in ready-to-go attended automation and support for long-running workflows in Linux. During the quarter, we also announced automation cloud public sector achieved FedRAMP in-process status. FedRAMP authorization will increase our addressable market in the federal space where we already have a meaningful presence. All of these points to the considerable momentum that continues to build in our cloud business, which continues to be in hyper growth with cloud ARR more than doubling year-over-year and to provide customers even more flexibility. We recently introduced a new pricing model that allows for overall migration between On-Prem and Cloud. Our global health care exchange is a great cloud customer case study, which started its automation journey with automation cloud. During this past quarter, they expanded with a multi-year roadmap to apply automation to address more complex business problems leveraging document understanding for large-scale document conversion, AI computer vision to source images reliably from vendor websites, while rolling out a new citizen development program to accelerate internal adoption. We also continue to expand our partner ecosystem, making automation easier as both go-to-market and technical partners help customers deploy automations quickly and realize fast time to value. On the go-to-market side, partners like NCS are both deploying our platform internally as well as leveraging it to generate revenue and better serve their customers. Our leading technology services for Asia Pacific, NCS, expects to deploy hundreds of automations within their organization and to create a UiPath automation practice focused on the delivery of the fully automated enterprise to their customers. From a technical perspective, we announced integrations with Adobe's document services and Adobe Acrobat Sign to help customers automate end-to-end document processes to drive productivity and scale in a secure manner. Myndshft, a leading provider of automated prior authorization and real-time medical benefits check technology, enables better patient care faster by reducing manual operational tasks and introducing significant operational efficiencies. And airSlate, a fast-growing workflow automation company, empowers individuals and small businesses to create, innovate and automate to digitally transform their organizations to run faster, easier, and more efficiently. Before I turn the call over to Ashim, I'd like to welcome our new co-CEO, Rob Enslin. When I met Rob, I knew that he would be the right partner to help me lead UiPath. His roots were in development at SAP, where he went on to a series of increasingly senior executive roles. Based on his ability to build and lead organizations, his operational skills, and his commitment to customers, most recently as President of Google Cloud, he led the team of several thousand employees that drove considerable growth at scale. While his experience and skills are important, it's Rob's personality and his passion for the power of automation that are a great fit for UiPath. I'll turn the call over to Rob for a few minutes to share his perspective.

Thanks, Daniel. It's exciting to be on the first of many earnings calls at UiPath. It's been just over two weeks since I formally joined, but I've been watching the company for some time. I've studied UiPath's platform, market opportunity, and competitive moat. And I'm convinced that in the automation, AI, and ML space, UiPath will be a leader that all companies will embrace over time. I've also been impressed by Daniel's focus on culture, which is the intangible that can create success or undermine potential. We have the opportunity to build a company that not only delivers disruptive technology to our customers but is also defined by how we develop and empower our employees, care for our communities, and give back to our society. I've spent my early days, as you would expect, meeting the team and some of our customers and starting to form my view on where I can have the most impact. We have a powerful financial model. And at this scale, we can drive both growth and operational efficiency. I look forward to digging deeper into the business and meeting many of you over the coming months. I will turn it back to Daniel.

Thanks, Rob. I'll turn the call over to Ashim to talk in more detail about our first quarter results and provide guidance.

Thank you, Daniel. I also want to welcome Rob to the team. Before I get started, please note that unless otherwise indicated, I will be discussing results on a non-GAAP basis, and all growth rates are year-over-year. We ended the first quarter with total ARR of $977.1 million, up 50%, driven by net new ARR of $51.8 million. On a year-over-year basis, FX created an approximately $5 million headwind in the quarter, and we wrote down $5.5 million in ARR as a result of Russian sanctions. Our dollar-based net retention rate of 138% for the quarter reflects the write-down of Russia ARR. Net of the Russia impact, dollar-based net retention rate was 139%, and dollar-based gross retention rate was 98%. First quarter revenue grew 32% to $245.1 million. Normalizing for the year-over-year FX impact, which was an approximately $14 million headwind, revenue grew 39% year-over-year. We are seeing the large deals that have been in our pipeline starting to take shape, including one that we closed with a customer in the health care vertical in the first quarter, which helped to drive some of our first quarter revenue upside. First quarter remaining performance obligations increased 46% to $675.6 million. Normalizing for the year-over-year FX impact, which is an approximately $47 million headwind, RPO grew 56% year-over-year. Current RPO increased 45% to $424 million. Total gross margin was 85%, reflecting first quarter revenue seasonality and investment in cloud infrastructure. Software gross margin was 92%. We continue to invest in services and cloud hosting as we scale our cloud business. First quarter operating expenses of $219.1 million increased 49%, driven in part by headcount additions and our annual employee merit cycle as we reward our top talent and focus on long-term employee retention. First quarter GAAP operating loss of $116 million included $101.5 million of stock-based compensation expense. Non-GAAP operating loss was $10.9 million. First quarter non-GAAP adjusted free cash flow was negative $53.8 million. As we mentioned on our last earnings call, we pay our annual corporate bonus and our fourth quarter sales commission in the first quarter. We continue to expect non-GAAP adjusted free cash flow to be driven by normal seasonal patterns and to be neutral to slightly positive for the fiscal year. And we have $1.8 billion in cash, cash equivalents, and marketable securities, and no debt. Let me now turn to guidance. One of UiPath's strengths is our global presence, which gives us diverse perspectives and access to talent. We price in local currency and with more than 50% of our business conducted outside North America, our results are subject to foreign exchange volatility. We recognize that macroeconomic and geopolitical issues are impacting global markets and the strengthening of the US dollar continues to create a currency headwind for our business. As we did in March, the guidance we are providing this afternoon contemplates the current operating environment and includes an FX headwind offset by growing momentum in the business. Please note FX commentary is the incremental headwind to the numbers we discussed at the end of March. First, for fiscal second quarter 2023, we expect ARR in the range of $1.04 billion to $1.042 billion. This includes absorbing an approximately $3 million FX headwind. We expect revenue in the range of $229 million to $231 million. This includes absorbing an approximately $5 million FX headwind. We expect non-GAAP operating loss to be in the range of negative $60 million to negative $55 million. This includes absorbing an approximately $2 million incremental FX headwind. And we expect second quarter basic share count to be approximately 546 million shares outstanding. As a result of our strong first quarter, we are absorbing incremental FX headwinds and raising our full year guide for ARR revenue and non-GAAP operating margin. For ARR, we now expect ARR in the range of $1.22 billion to $1.225 billion. This includes absorbing an FX headwind of approximately $10 million. For revenue, we now expect revenue to be in the range of $1.085 billion to $1.090 billion. This includes absorbing an FX headwind of approximately $20 million. For non-GAAP operating income, we now expect non-GAAP operating income to be in the range of $10 million to $15 million. This includes absorbing an FX headwind of approximately $10 million. In summary, our pipeline continues to strengthen as some of our large deals take shape and progress through the sales process. Crossing the $1 billion mark, we remain laser-focused on realizing the efficiency that comes with scale to drive both short and long-term operating leverage and further increase our speed, agility, and customer centricity. Looking forward, we expect this combination of top-line growth and bottom-line efficiency to drive positive cash flow in the second half of the year. As Kelsey mentioned, please note that we will be hosting Investor Day on September 27th in Las Vegas, followed by our FORWARD IV user conference. We look forward to speaking with many of you in the coming weeks. We'll now take questions, and I will turn the call over to the operator.

At this time, we will be conducting a question-and-answer session. Our first question is from Raimo Lenschow with Barclays. Please proceed with your question.

Hey, thank you, and congrats to me for the quarter, and Rob, all the best in the new role. The question I had is, well, for all of you, probably more Ashim, is around the deals taking shape. So you remember last quarter, you were one of the first to talk about it because you kind of reported later. And that created a lot of questions amongst investors in terms of how this will play out for you. Is this like macro as kind of people not signing deals or people kind of needing to think how they shape the deals? You made a couple of comments, Ashim, about that. Now can you speak a little bit more to that? You mentioned the one health care deal, but is there a little bit more color that you can give us there? Thank you very much, and congrats again.

Hey, Raimo, thank you for the question. And let me start first, and then I'll let Ashim give you more color. Look, I've been on a long trip before this earnings call through Europe and Asia, talking with a lot of customers. We are seeing a renewed interest in automation. We are also seeing positive maturation on the big deal evolution through our pipeline. But overall, in this macroeconomic climate, we put a lot of pressure on our customers to become more efficient, and they are turning to automation as one of the easiest ways to navigate through these murky waters. Ashim, over to you.

Yeah. I think – Raimo, thanks for the question. What we talked about last quarter was there was no denying the macro volatility. And we reiterated the fact that we weren't losing deals. Automation was important. These deals existed in our pipeline. It was just a question of uncertainty as our customers were grappling with the new realities of war, inflation, etc. We're now 30 to 60 days later. And what we see is we see deals progressing through all the stages of our pipeline. As Daniel said, there is positive maturation in terms of the way they are taking shape. So as we look and we track deals through our pipeline, we see that movement, which gives us more confidence or moderated confidence on the conversion of those deals, and we've reflected it appropriately in our guidance.

Okay. It's very clear. Thank you.

Our next question is from Bryan Bergin with Cowen. Please proceed with your question.

Hi. Good afternoon. Thank you. I've got a question here for Rob. So Rob, just as you step back and look at the business, can you just talk about maybe one of your top one or two priorities as you think about the go-to-market function?

Sure. So three weeks in, I've had the opportunity to observe, talking to customers. I reiterate what Daniel and Ashim said: UiPath can play a meaningful role in these economies, and I see that happening. Now we're going to focus on digital sales. We're going to drive digital sales. We're going to get into the key customer accounts, drive further adoption, higher customer satisfaction to ensure that we actually get better returns for those customers, and we're going to expand the ecosystem and channel business.

Next question, please.

Thank you. Our next question is from Kirk Materne with Evercore ISI. Please proceed with your question.

Hi. Thanks very much for taking the question. And Rob, congrats on the new role. Daniel, I was wondering if you could just go a little bit deeper on some of the sales changes you guys are making under Chris, and I'm sure Rob is going to play a big role there, just in terms of how you're also leveraging partners to try to drive the sales higher in the C-suite. I was wondering how those two things are interplaying with each other and what you're seeing with partners that gives you confidence that that sort of upsell or higher level sales in the C-suite is something you guys can do a lot more of going forward? Thanks.

Sure. We are looking to drive some incremental changes in our go-to-market that will focus us to be more customer-centric. We will also put more emphasis on the emerging enterprise sector that we believe will help us get more new logos in a more efficient way. I think the new partner strategy is to focus the top GSIs more on the key accounts while we will have the long tail of partners focusing more on the emerging enterprise sector. We believe that this new strategy will allow us to focus more and provide faster adoption to our key accounts. Maybe, Rob, you also have something to add. I'll just add that I think we can be very relevant in the office of the CFO, the head of supply chain, and sales leadership, marketing, and HR departments. Together with the big GSIs, that's where we'll focus because that's where they have strength, and our solutions really add value there. So that's where we're going to focus for the big GSIs and the systems integrators.

Thank you. Our next question is from Keith Weiss with Morgan Stanley. Please proceed with your question.

Excellent. Thank you guys for taking the question. Nice to see that pipeline developing better than expected. I guess, carrying on from sort of that last question, it sounds like there is some sense that sales are going. Am I reading that correctly that this is a larger than typical sales reorganization? And is there kind of execution risk that we should be aware of with Rob coming on board and sort of the changes that you're trying to put into place? I'm just trying to make sure that we ascertain the level of change and the potential risk of disruption with what you guys are doing on the sales side of the equation.

Well, we are at the scale right now where we have to prepare this company to grow consistently and efficiently into the next stage. This is why largely we brought Rob and Chris to help us execute really well at this stage. So at this point, we are looking to be more customer-centric, scale our emerging enterprise teams, and globalize functions to be capable of being more consistent across the regions. So it's a balancing act between efficiency, consistency, and agility that we are trying to bring into our go-to-market. I think Rob, if you want to comment more.

I think that, as Daniel said, that's exactly where our focus is.

Our next question is from Michael Turrin with Wells Fargo Securities. Please proceed with your question.

Hey, there. Good afternoon. Thanks for taking the question. Ashim, in terms of the outlook and just following up on the first question around large deals, I wanted to just focus in on what else changed versus last time. You've referenced guiding for what you're seeing most recently. So maybe if you can just expand upon any increased visibility you have now versus when you were guiding initially in March? And then the impacts of things like cloud, large deal assumptions. And I just want to be clear; the FX headwinds that you referenced were those incremental versus what you had called attention to in Q4, which you think was the $20 million to $25 million in ARR. I just want to be crisp and clear given the moving pieces here as best we can. Thank you.

Yeah. No, that's great. Great question. When we sit back and look at our guidance, we continue our guidance philosophy: we guide with what's in front of us. I think you stated that correctly. So let me start with FX as that was a theme. The FX is a fact that's out there as the euro and the yen continue to depreciate, and we factor that into our guidance as we've provided guidance in our current guidance that we've provided. We talked about the large deals. We just monitor our pipeline very closely and, of course, the top deals that are there. We're pleased with the momentum and the movement. And I think that relates to the fact that our customers themselves are starting to get a handle in navigating the environment, which takes some time to digest. In terms of what else has changed, I would say, everything else strategically with the business remains on course. So our cloud business remains strong. We're very optimistic about the customer response and the metrics around our cloud business. One of the other areas where we see opportunities for efficiencies in our company, and that's why we've also increased our operating margin targets for the year. As we look at how sales are realigning, those deals have made significant progress, thus allowing us to project confidently moving forward.

Yeah. And I just want to be clear. This is Kelsey. When you asked about FX, it is an incremental headwind to when we gave guidance at the fourth quarter call. And we also had some commentary on cloud that we expected it to be about – I think it was a 4% headwind as we went through the full year.

And that 4% is not incremental. That's consistent with what we discussed 30 days ago.

Our next question is from Mark Murphy with JPMorgan. Please proceed with your question.

Yes. Thank you. And I'll add my congrats. So Daniel, we've had a few software companies indicating that the month of April was softer, while the month of May showed some signs of getting back to normal. I'm curious if that aligns at all with what UiPath has experienced. Are you optimistic that Q1 could have been perhaps the trough for how we would think about the net new ARR growth year-over-year?

Well, we knew that Q1 was going to be a choppy quarter, and we have guided accordingly. We were seeing throughout the quarter a positive momentum, especially on the big deals like that deal with the health care insurance company that we closed in April, for instance. That was really positive news for us that gave us some tailwinds for the entire quarter. And as we are progressing into May, we are seeing a healthy pipeline creation. So we are cautiously optimistic about how the business is shaping right now.

And Mark, I would just point to our guidance. When you look at it, we guided to – we guided between $63 million and $65 million for ARR. I think that kind of speaks to what we see the trajectory at this moment. In terms of whether we are at a trough in this, we'll continue to monitor and ensure that we're executing at a high pace to be able to execute in any environment. But I think our guidance speaks to where we see the trajectory right now.

Our next question is from Michael Turits with KeyBanc. Please proceed with your question.

Hey, guys. Thanks very much. It looks like a nice stabilization in the business. On that front, and as some of the prior questions, there were a couple of comments you made last quarter. One was about the decreasing size of the deals that were in the pipeline and also some headwinds around public sector business in Europe. How have those two factors trended into this quarter?

We actually were talking about the large deals and uncertainty about their size and duration. As we've commented this quarter, those deals are taking shape and progressing through the pipeline. We've adjusted our guidance to reflect a moderate amount of optimism in terms of the conversion of those deals, especially in the second half. In terms of Europe and the public sector, we continue to hear anecdotes around there being pressure in Europe, which is just understandable given the climate and the war there. But we are pleased with the movement in our pipeline, and we're also pleased with the way our sales team is executing in this environment.

Our next question is from Siti Panigrahi with Mizuho. Please proceed with your question.

Thanks for taking my question. You guys talked about the new business and pipeline. Just wondering on the dollar-based net retention rate on site, mainly from your existing customers. It's come down from 145% to now 139%, excluding the Russian impact. You guys talked about that on the Q4 call. But I wonder if you could provide any color on that expansion in terms of your customers buying more robots versus buying other products like automation cloud. Is this some kind of trough we'll see, or are there a few more quarters in that DBNR trough?

Look, I think we're pleased – we continue to be pleased with our dollar-based net retention rate. It's still a leading metric when you look at peer companies at 138% in terms of reported. We talked about the impact of both FX and Russia. In terms of customer behavior, we continue to feel optimistic about what we're seeing. More customers are embracing our platform. We see larger $1 million-plus customers increasing steadily, as well as customers over $100,000 now exceeding 1,500. That really reflects continued optimism and buy-around the platform and the opportunity for customers to continue to automate more processes. In total, we added 12 new customers greater than $1 million, nearing 170 customers now. That shows robust growth in terms of the adoption of our platform.

Our next question is from DJ Hynes with Canaccord. Please proceed with your question.

Hey, guys. Congrats on the quarter. I imagine time to value is a big focus in the current environment. What kind of steps are you taking to help customers realize a quick return on the investment they're making? And how do you help them think about that during the sales process?

Well, first of all, I would like to tell you that automation has become a real board priority and C-level suite priority for many of our customers. I talk to customers in different industries, public sector, and they are really turning to automation at this point. We are seeing good momentum helping them with accelerating the adoption. Our renewed focus on our key accounts and pairing our GSIs with the key accounts will help with the adoption. I believe that, also in the emerging enterprise segment, we can significantly accelerate adoption and acquire net new logos. I would also like to highlight our 22.4 release with a big focus on the cloud that is also removing some friction to adoption. So overall, we are really seeing positive signs on the acceleration of adoption within our customer base.

Our next question is from Brad Sills with Bank of America. Please proceed with your question.

Great. Thanks, guys, for taking my question. I wanted to maybe double-click a little bit on the cloud, Daniel. Since you have this new release, do you see this as an acceleration in that down market business with lower TCO, or do you see this as potentially a broader play within the large enterprise base as they gradually move towards the cloud? I guess, what are you hearing from customers, both large and small, regarding their willingness to implement RPA in the cloud?

Well, I think it's both. We have a certain number of very large companies that switched completely from on-prem to cloud development, but I'm very bullish right now about the opportunity in the mid segment. We have launched in GA in this release for the first time the hosted robots in the cloud. We call them the automation cloud robots. And that can make a line of business progress faster with the adoption. To a certain extent, they are independent of IT in developing an automation program. So this will speed up quite a bit the adoption into the mid-market. I also want to mention our newly released function that we call serverless robots, which can open entire new use cases in kind of API combining RPA with API integration that previously required different vendors and different types of technology. Overall, the progress in the cloud is going very well. We have a great team, and I just spent last week in Bellevue with them. It's a very impressive product, a world-class product they built. It's really good timing right now to address the mid-market.

Our next question is from Alex Zukin with Wolf Research. Please proceed with your question.

Hey, guys. Thanks for taking the question. So I guess all of us who are sitting here, we're trying to figure out kind of, I think, where the incremental confidence is stemming from? Is it the feeling that deals that were previously out of the pipeline are now back into the pipeline that are large and strategic? Is it that you've got greater confidence in the close rates in general? Is it some of the initiatives that you're putting into place from a sales change perspective that are going to materialize maybe faster than you initially anticipated? Because now the guide for the year on a constant currency basis for net new ARR is flat, which I think is a really positive surprise to all. So I think just maybe touching on where that incremental confidence comes from, especially in the backdrop of us all reading the same headlines.

So Alex, good to hear your voice. I think first is we recognized the macro impact early on and acknowledged it. In some ways, we were a step ahead in terms of how we were looking at things. In terms of our confidence, I want to reiterate that our guidance is always to guide what's in front of us. We look at our pipeline. We've talked about the strength of our pipeline overall, and that has been consistent. We've expressed confidence in our pipeline even in the first quarter. We never felt like things were coming out of the pipeline; we just felt an uncertainty in the timing of their movement through the pipeline. As we look at our pipeline today, we have several of those deals that we've seen movement on and the movement through the sales process gives us increased confidence in their conversion and what shape they're taking, and that is what we've been able to reflect in our guidance. In addition, when you just hear the sentiment from the field, automation continues to be a macro priority for us, and our TAM continues to feel big. We have invested in our company and many of our areas, covering various markets. So we feel very good about our customer connections to continue to execute. Those are the factors that allowed us to raise our guidance. And then on the bottom line, that is a point of focus. We have crossed the $1 billion mark, and we feel like we can both grow while executing efficiently. We reflected that in our guide as well.

I would like to add our renewed confidence in the executive team. I think Rob and Chris are leading our team well. We are seeing really positive responses from our teams, and all the discussions, not only from me but from everyone meeting customers, bring renewed energy to our discussions. Overall, it's a better environment than we were seeing two months ago.

Our next question is from Terry Tillman with Truist. Please proceed with your question.

Hey team. This is Connor on for Terry. Thanks for taking the question. Just for me, how is automation faring with internal budgets at customer companies? Is there maybe a greater lot of funds that you're seeing to invest long-term into transformational automation in a choppy macro environment? Thanks.

From discussions with CFOs, I can tell you that digital transformation is not going away; it's only accelerating. I think we're positioned well to take our share of that digital transformation budget that is there. Many of our customers, you could see that the customers greater than $1 million have moved up 62% year-over-year, and our customers greater than $100,000 have crossed 1,500 and are moving up 42% year-over-year. That speaks to the fact that budgets continue to be allocated for automation. I think in a period of labor shortage and inflation, we've always felt like the secular tailwinds can allow for those budgets to be allocated to us, and we see that in the strength of our pipeline right now.

Our next question is from Fred Havemeyer with Macquarie. Please proceed with your question.

Hey. Thank you, and congratulations on the strong start to the year here. I think we've all been asking in many different ways about the macro environment. So I'll try to ask in a slightly different one. With respect to Europe, last quarter, I think we talked about how there's certainly some slowness that you were seeing, and I wanted to ask, is there a way to differentiate in terms of Eastern versus Western Europe within your pipeline or your business, or just give any context really on how both segments of Europe are performing?

Well, our business in – I think we don't disclose, first of all, on the regional level. But anecdotally, I'm telling you, I'm not seeing a significant difference between Eastern Europe and Western Europe in terms of the deal shaping. Ashim, if you want to add anything?

I agree with you, Daniel. Europe is definitely the area that we've recognized and accounted for in terms of the most challenging environments, but no distinction between Eastern and Western besides, of course, the accounting of Russia specifically and our pause on doing business in Russia.

Great. Next question, please.

Our next question is from Phil Winslow with Credit Suisse. Please proceed with your question.

Hi, guys. Thanks for taking my question. Congrats on the strong start. I wanted to focus on the front end of the automation journey here: process mining, task mining, task capture. I mean, obviously, it's unique UiPath to have all those front-end functions then feed a log down the automation journey. What are you hearing from customers now that you've had a couple of iterations of those solutions out? You're more integrated. Is the sort of the full suite starting to resonate and differentiate you? Just any color there would be helpful.

Hey, Phil, our customers are receiving our end-to-end platform very positively. I can tell you that our growth products internally, such as process mining and task mining, are actually performing quite well, growing at much faster rates than our core businesses. Also, another data point is that the white spaces around our core automation are actually helping drive more use cases into the pipeline for automation. So overall, we are seeing positive adoption across the entire platform. In particular, we made solid progress on the process mining technology. We are releasing it in the cloud, which is much more scalable, and we are adding a lot more connectors. We are trying to address the needs of most of our customers with what we are having in the process discovery pillar.

Our next question is from Ari Terjanian with Cleveland Research. Please proceed with your question.

Hi. Thanks for taking the question. Congrats on the start to the year. I was hoping you could provide a little more clarity on what you're seeing in the pipeline in terms of the types of customers that are coming to the table, either by vertical and geography. You mentioned the big health care deal in the first quarter. Are there any patterns that you're seeing in terms of types of customers in the pipeline for the rest of the year? Thanks.

Automation is something that's relevant to every single vertical. Of course, our presence in the financial and banking sectors and health care continues to be our two largest areas. But we see it broadly across our pipeline. It's diverse; we engage with local governments, small enterprises, and large enterprises, including Fortune 500 companies. Our pipeline continues to show strength and interest in expansion and adoption across our platform and across all the segments. This includes flanking and replacing our competitors, which we are seeing more of, especially as we have our latest product releases and customers are recognizing the breadth of our platform. I would say there is no distinct pattern that's different from history. We feel very good about it across our verticals.

We have reached the end of the question-and-answer session. I will now turn the call over to management for closing remarks.

I want to thank you all very much for participating in this afternoon's call. We look forward to speaking with many of you throughout the quarter. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.