Earnings Call Transcript - PATH Q3 2023

Operator, Operator

Greetings. And welcome to the UiPath Third Quarter Fiscal 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 will now turn the conference over to our host, Kelsey Turcotte of Investor Relations. Thank you. You may begin.

Kelsey Turcotte, Investor Relations

Good afternoon. And thank you for joining us today to review UiPath’s third 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’s Co-Founder and Co-Chief Executive Officer; Rob Enslin, Co-Chief Executive Officer; and Ashim Gupta, Chief Financial Officer. Rob will start the discussion and then turn the call over to Daniel. After that, Ashim will review our results and provide guidance. Then we will open the call for questions. 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 our ability to drive growth and operational efficiency and our financial guidance for the fiscal fourth quarter 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 year ended January 31, 2022, and our other reports filed with the SEC, including our quarterly report on Form 10-Q for the period ended October 31, 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. As a reminder, we present in local currency and have experienced a significant foreign exchange headwind as we have progressed through this fiscal year. Now, I would like to hand the call over to Rob.

Rob Enslin, Co-CEO

Thank you, Kelsey, and good afternoon, everyone. Thank you for joining us. We are pleased with third quarter results, which delivered both topline growth and margin expansion. ARR was $1.110 billion, driven by net new ARR of $67 million. Excluding the FX headwind of $22 million, total ARR grew 38% year-over-year. Revenue was $263 million. Excluding the FX headwind of $22 million, revenue grew 29% year-over-year. Non-GAAP operating income was $18 million, a third quarter record, reflecting our focus on disciplined capital allocation and cost management. During the quarter, we added new logos like Petco, Nautilus, and Wisconsin Energy, and saw particular strength in our healthcare and telecommunications verticals. A great new logo in the quarter was Orica, one of the world’s leading mining and infrastructure solutions providers. In a competitive win over two standalone vendors, one in enterprise automation and one in test automation, and working with Accenture as an advisor, Orica selected UiPath because of our ability to deliver both enterprise and test automation in one platform. With C-suite sponsorship, Orica is planning to migrate and scale their existing enterprise automation program with UiPath and utilize the test suite to enable successful upgrades of their SAP S4/HANA. The third quarter is also the federal year-end, and under new leadership, we are very pleased to report that we delivered a strong quarter in that vertical, including expansions with the U.S. Air Force and the U.S. Department of Homeland Security. Customers appreciate both the quantifiable and intangible business outcomes that our automation platform can deliver, including business risk reduction, improved customer and employee experience, profitable growth, and the ability to allocate resources more effectively. These are outcomes that resonate across lines of business and up to the C-suite. For example, one of North America’s largest third-party logistics firms, Total Quality Logistics, is using Document Understanding, software robots, and Task Mining across their organization. In just two years, automation has delivered both strong ROI and helped them grow, including driving revenue in a new line of business without adding headcount. Going forward, Total Quality Logistics also plans to implement Process Mining to identify macro processes that can benefit from automation. It has been a busy few months for the team, and we are executing well across all of the key strategic initiatives that we laid out at our Investor Day. These include extending our market leadership with our largest platform release 22.10, which Daniel will talk about in more detail, driving platform adoption with our market-leading capabilities in every stage of the automation lifecycle, making significant progress in uplifting our go-to-market model, announcing some great technical and go-to-market partnerships, and lastly, to build out our world class team, with the addition of Lee Hawksley who will lead our APAC go-to-market team. Now, I would like to take a few minutes to update you on the progress we have made on our go-to-market initiatives. All of this work is designed to enable our teams to sell higher into organizations, define business outcomes that resonate with C-level executives, and accelerate customer time to value. To make sure we are on the right track, we tested many of these new approaches in our North American market and were very pleased to see they played an important role in several notable third quarter wins. Next step is a formal roll-out across the geos, much of which we started at the beginning of the fourth quarter when we launched new packaging and pricing designed to simplify our go-to-market motion. This approach brings together the solutions necessary to more quickly realize the advantages of broader platform adoption in a one line-item SKU. We also expect this pricing model to reduce friction in the purchasing process. We formally introduced NorthStar, our new value-based selling tool. This prescriptive and predictive model helps our sales reps position the value of automation to customers through an engagement framework that defines economic value, the execution roadmap, and best practices. It is a great tool to clearly position the differentiated, long-term benefits of automation delivered through our full platform of capabilities. We are also leveraging our extensive industry insights to align sales teams around verticals like financial services, healthcare, and technology, media, and telecom, where we have had good success to-date and identified considerable whitespace to continue to grow in both new and existing customers. The focus helped us close a third quarter expansion deal in the financial services vertical with Bank of New York Mellon Pershing, a UiPath customer since 2020. Through their implementation of UiPath, their automation program scaled quickly, improving both efficiency and risk mitigation across the firm, as well as their client experience by leveraging UiPath’s software robots to process transactions more consistently. As a result of these positive outcomes, Bank of New York Mellon is now rapidly expanding to the full platform across their organization. And to give customers in these verticals even more tools for success, we are piloting our first Solution Accelerator to provide them a starting point for their automation journey. We are excited about Solution Accelerators and believe they will provide our customers with the technical knowhow to help them complete their implementations significantly faster. With customer success always in mind, we continue to deepen our relationships with global GSIs and automation experts. At Forward 5, we announced our expanded partnership with EY, also one of the largest UiPath customers, that puts the partnership on par and at scale with their largest Ecosystem Partners. The strengthening of this global alliance is a testament to the trust that we have developed and their belief in the massive growth potential that the UiPath automation platform presents for global organizations. We also continue to expand our technical ecosystem. During the quarter, we announced several strategic partnerships with major technology providers, including Microsoft, which named UiPath as their preferred enterprise automation partner, while we announced Microsoft Azure as a preferred cloud platform for UiPath. We plan to continue to collaborate and innovate together to bring automation solutions powered by Microsoft Azure to market. And Outsystems, to combine the power of the UiPath Business Automation Platform with OutSystems’ high-performance, low-code. Together, we expect to enable customers to securely and intelligently automate core business processes and applications. One of the best proof points of our execution is the growth of our larger customer cohorts and this quarter we were very pleased that our cohort of customers over $100,000 in ARR increased to 1,711, including customers over $1 million of 201. For these customers, automation isn’t just a tool they can use to reduce or eliminate tedious work; it’s part of their strategy, growth plans, and operating model. I feel good about where we are in our journey to take this company beyond $1 billion. We have the market-leading automation technology and platform, the right leaders putting the right go-to-market structure in place, and we are making the disciplined decisions that allow us to drive growth, increase productivity, and expand operating margin. We are already seeing the positive impact of our work as we head into the fourth quarter, and the team is focused on a strong close. I will turn the call over to Daniel to talk about our 22.10 platform release and newest innovation.

Daniel Dines, Co-CEO

Thank you, Rob. Good afternoon, everyone. Before I get started, I’d like to thank the UiPath team for their hard work and commitment to our customers and partners who recognize and appreciate your dedication to their success. In fact, one of the things I enjoy most about my role at UiPath is spending time with customers to understand where they are in their digital transformation journey and talk to them about the role automation can play in that evolution. Given today’s unpredictable operating environment and tightening budgets, automation is a powerful engine that directly addresses these challenges and changes the way organizations of all sizes operate and innovate. We had great platform expansions in the quarter, such as ManpowerGroup, a UiPath customer for four years. After successfully deploying automations in their finance department, they expanded to use our full platform in the quarter as they look to scale their automation program internally and deliver workforce solutions to their clients. Ultimately, platforms win, because integrated technology is easier to manage and drives faster time to value. With market-leading capabilities in every stage of the automation lifecycle, our platform outcomes resonate with the C-suite and are a significant competitive advantage for us. A great example of platform adoption is a deal we closed with HCA Healthcare, one of the nation’s leading healthcare providers. HCA has been a UiPath customer for two years with numerous software automations in production. In the quarter, they expanded our partnership by adopting the entire UiPath platform in a multiyear agreement. Coming out of our Forward 5 user conference and our most important platform release this fall, 22.10, momentum is building across the business. This release allows customers to automate more, faster, and with less friction, expand user and builder bases, and operate it all more efficiently and effectively. This recent platform release includes a preview of Studio Web, the latest member of our Studio family, which completes our cloud offering, further reduces the friction in ramping citizen developers, and provides a cross-platform developer experience. 22.10 also delivers the ability to build public-facing applications with UiPath Apps, enhanced capabilities in Process and Task Mining, and platform intelligence to help our software robots understand both structured data with Document Understanding and unstructured data with the acquisition of Re:infer. There’s a massive amount of value to be captured by automating processes involving unstructured data. During the quarter, several customers added Re:infer, which we recently acquired and have renamed Communications Mining to their automation program. This includes a leading U.K. fund administrator and UiPath customer since 2019, that is planning to leverage Re:infer to drive efficiencies and improve customer experiences by automating tickets in their case management system for their HR, payroll, accounting, and tax departments. 22.10 also delivered enhanced capabilities for both Automation Suite and Automation Cloud, both of which helped drive triple-digit year-over-year growth in Cloud ARR. One of our core tenets is flexibility of deployment to meet the customer wherever they are on their automation journey. This constant focus on innovation has won us recognition by thought leaders and industry analysts, and we are proud of the recent reports from Everest Group and ISG. According to Everest Group’s Robotic Process Automation Products PEAK Matrix Assessment 2022, we were named an RPA Leader for the sixth consecutive year and Star Performer in the Technology Provider Landscape. ISG named UiPath a leader in their latest application development research focused on low-code/no-code software companies. This recognition reflects our commitment to category leadership and innovation across the platform. I am proud of what we accomplished in the third quarter and excited about the massive opportunity ahead. The need for automation is greater than ever before, and I believe UiPath will continue to play a leading role in helping organizations not only thrive but increase their competitive advantage. With that, I will turn it over to Ashim.

Ashim Gupta, CFO

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. I also want to note that FX was a significant headwind to our results again this quarter. I will start by running through our third quarter and then provide fourth quarter guidance. Third quarter ARR totaled $1.110 billion, driven by net new ARR of $67 million. Because we sell in local currency, foreign currency fluctuations do not impact demand for our product, but do impact the translation of our results. On a year-over-year basis, FX was an approximately $10 million headwind to net new ARR, and for total ARR, FX was an approximately $22 million headwind. Excluding FX, total ARR grew 38%. We now serve approximately 10,650 customers. As we shared at Investor Day, we are positioning the company to land and grow customers with a high propensity to invest in automation, while distributors will serve the lower end of the market. Moving on, our dollar based net retention rate was 126%. Normalizing for FX and excluding the impact of Russian sanctions, our dollar based net retention rate was 130%. Americas continues to show strength as our dollar based net retention rate outperformed relative to the rest of the world. Dollar based gross retention of 98% continues to be best-in-class, underscoring the transformational business outcomes that customers achieve with our platform. Revenue grew to $263 million. Normalizing for the year-over-year FX headwind of approximately $22 million, revenue grew 29% year-over-year. Remaining performance obligations increased to $759 million. Normalizing for the year-over-year FX headwind of approximately $50 million, RPO grew 40% year-over-year. Current RPO increased to $441 million. Total gross margin was 86%, reflecting ongoing investments in support and cloud infrastructure as we scale that business. Software gross margin was 92%. Third quarter operating expenses were $209 million. We continue to focus on operational efficiency, including our restructuring actions, hiring freeze, and tighter control of discretionary spend. GAAP operating loss of $67 million included $81 million of stock-based compensation expense. Non-GAAP operating income was $18 million, our strongest third quarter non-GAAP operating margin to-date. Third quarter non-GAAP adjusted free cash flow was negative $24 million, reflecting timing of collections and prepaid vendor contracts that allow us to lock in favorable terms for UiPath in an inflationary environment. We have a very strong balance sheet, which is an important asset in the current operating environment, with $1.7 billion in cash, cash equivalents, and marketable securities and no debt. Now, let me now turn to guidance. We guide what we see in the pipeline and assume that the current choppy macro environment and pressure from foreign exchange continue. Turning to the numbers. First, for fiscal fourth quarter 2023, we expect ARR in the range of $1.174 billion to $1.176 billion. This is an increase from prior guidance of $1.153 billion to $1.158 billion. We expect revenue in the range of $277 million to $279 million. We expect non-GAAP operating income to be approximately $35 million. And we expect fourth quarter basic share count to be approximately 554 million shares outstanding. Finally, we will guide to first quarter and full year fiscal 2024 when we announce our fourth quarter results, but I want to highlight that we expect typical enterprise seasonality from the fourth quarter to the first quarter in both net new ARR and revenue results. We delivered a solid third quarter as our durable financial model and strong balance sheet give us the resources to invest in long-term growth and drive sustained profitability, both of which are core to our go-forward strategy. The team is focused on delivering meaningful outcomes for our customers, and we look forward to a strong close to fiscal year 2023. Finally, I would like to wish our employees and all of you a healthy and happy holiday season and we look forward to speaking with many of you in the coming weeks. With that, I will turn the call over to the Operator. Operator, please poll for questions.

Operator, Operator

Thank you. Our first question comes from Phil Winslow with Credit Suisse. Please go ahead.

Phil Winslow, Analyst

Hi. Thanks for taking my question and I appreciate all the color, particularly on the go-to-market changes, which is really where I want to focus my question. Rob, obviously, you made some changes when you joined, and I wonder if you could walk us through just sort of your thoughts on call productivity versus just capacity in the sales force? How do you kind of think with these changes you are making sort of productivity should start to inflect? And then, similarly, how do you feel about sort of the capacity of the go-to-market push right now? And then just have one follow-up.

Rob Enslin, Co-CEO

Yeah. Thanks, Phil. We feel good about the capacity we have got and aligns with the strategy we outlined at Investor Day and we are starting to see real proof points around our strategy and how we are delivering that, and the team is actually focused on really good delivery. So if you look at, like, what I would say is, one of the best proof points of our execution is the growth of our customer cohorts. When you look at $100,000 in ARR. We have increased that to 1,711. And when you look at customers over $1 million now, it’s up to 201. So we feel good about the go-to-market, the segmentation, and our execution and how far we have come in a relatively short period of time.

Phil Winslow, Analyst

Great. Daniel, you mentioned the importance of efficiency and driving productivity as a reason for companies to adopt automation. The dollar-based net retention remains strong, indicating that existing customers, who have seen success, are engaged. However, when approaching new customers who are just beginning their automation journey, what triggers their realization about the advantages of automation and why they should embrace RPA along with your complete hyper-automation suite for productivity improvements?

Daniel Dines, Co-CEO

I believe this reflects a similar motivation for our existing customers; they enhance employee productivity and increase customer satisfaction. We are observing a significant influx of new customers entering the automation space by adopting our entire platform. For example, as Rob mentioned in the case of Orica, our testing capabilities played a critical role in driving the adoption of the full platform, allowing us to outcompete two of our rivals. Therefore, the advantages of automation are even more pertinent for new customers in today's environment.

Operator, Operator

Thank you. Our next question comes from Brad Sills with Bank of America Securities. Please go ahead.

Brad Sills, Analyst

Oh! Great. Thanks so much, and it’s great to see some of the early success with the changes in go-to-market. Maybe on that topic, please, Rob, if you could expand a little bit on where you have seen some success. I know it’s early, but with some of these verticals you called out, some of these solution accelerators. Are there any ones in particular you would call out, and are there any learnings from your success in those areas that you might be able to apply more broadly?

Rob Enslin, Co-CEO

Yes, Brad, while we are still in the early stages of gathering data, I believe the evidence from ATA, Bank of New York Mellon, and Orica demonstrates the effectiveness of the NorthStar approach and the value we are delivering. We've launched our solution packages and are noticing a lot of interest, even though we don't have specific KPIs yet. Our sales team is well-equipped to navigate the current market environment, and their performance has been strong. We're making significant progress in the United States, and we're starting to see positive results with our team in Europe as well. Orica, being a leading energy company based in Singapore and operating globally, further illustrates that our global strategy is yielding progress.

Brad Sills, Analyst

Wonderful. Thanks. And then one for you, Ashim, if I may, please, on just the outlook that you provided at the Analyst Day for next year, ARR growth exiting the year at 20%. It’s down quite a bit, I mean, this quarter, you are at 38% constant currency; you are guiding to 20, it looks like 27%, maybe 29% constant currency for Q4, so a pretty big deceleration. Are you assuming a worsening macro in that outlook, or if you could just remind us what are you assuming in that number? Thank you.

Ashim Gupta, CFO

Yes, Brad, as we discussed during Investor Day, the projections we have for next year take into account the current macroeconomic situation we've been discussing, along with the foreign exchange conditions we've observed. We believe this outlook is consistent from Investor Day to now. We will give a more detailed update as we move into next year and release our fourth quarter earnings.

Operator, Operator

Our next question comes from Mark Murphy with JPMorgan. Please go ahead.

Mark Murphy, Analyst

Thank you and congratulations on the strong margin progress. Ashim, I noticed you didn't spend much time discussing macro issues tonight. I'm curious if it's reasonable to think that the current period of Q3 and Q4 could be the low point for net new ARR. Specifically, if it's declining in the 25% to 40% range, could there be a chance for improvement as you progress further into the repositioning, repackaging, and go-to-market adjustments in the first half of next year? Does that serve as a fair framework for understanding the business trends? I also have a quick follow-up.

Ashim Gupta, CFO

Yeah, Mark, it’s very consistent with what we have talked at Investor Day and Analyst Day. We look at the environment as consistent. So we probably have talked less about it just in terms of the environment between Europe, APAC, and Americas; we feel relatively the same environment as we talked about just a few months ago. In terms of our commitment to executing on the strategy that we laid out at Investor Day, we are all committed and actually excited about the progress that we are making around segmentation, solutioning, focus, identifying high-propensity customers. All of those factors in our mind, we feel are going to yield positive results, and that’s what we are executing to. I would remind everybody just we are going to see typical seasonality as we get into next year between the first and second quarter, but also first half and second half. But overall, we are pleased with the execution of the strategy and we are executing that strategy because we believe it will yield positive results.

Operator, Operator

Thank you. Our next question comes from Kirk Materne with Evercore. Please state your question.

Chirag Ved, Analyst

Hi. This is Chirag on for Kirk. Thanks for taking the question and congratulations on the strong quarter. Just one question for me around the reception of the automation platform. So how deep would you say you all are in terms of customer adoption of the overall end-to-end automation platform today within your existing customer base and largest customers when we are talking beyond core RPA use cases, and how are you continuing to pursue the opportunity to go deeper? And maybe if you could call out any specific areas that are carrying more weight or seeing more demand? Thank you.

Rob Enslin, Co-CEO

We are very optimistic about our business platform and the potential it holds. We see considerable future opportunities with our existing customers to expand. For example, we're seeing customers like Bank of New York Mellon and ATA using the full platform, and there are many more opportunities in this area. Solutions like our tests are expected to make a significant impact, and Document Understanding is proving to be a important driver for our platform. Additionally, we believe that with Process Mining and Task Mining, as demonstrated with Total Quality Logistics, our broader platform is beginning to show its influence. Our discussions with customers indicate that our platform is the preferred choice for automation. We feel very confident about our direction and how it aligns with our NorthStar strategy and pricing packages. While it’s still early, we are positive about our plans and execution.

Daniel Dines, Co-CEO

Yeah. This is Daniel. I would like to add that if you look from a competitive perspective, our platform strategy allowed us to move from our traditional market of automating existing manual processes to growing more to end-to-end process automation. So we are the only company that has a platform that covers the entire spectrum of automation, from large business processes to manual repetitive processes to even micro-tests that people are doing as part of their daily job.

Operator, Operator

Thank you. And our next question comes from Bryan Bergin with Cowen. Please go ahead.

Bryan Bergin, Analyst

Hi. Good afternoon. Thank you. It’s good to hear some of the early go-to-market initiatives here having some success, and I am curious on that, how the land size on some of the new deals are comparing to before. I know it’s early, but I think the company had talked about an average land size of 15,000 to 25,000 in the past. Can you just give us any sense on how we should be thinking about the average land size under this new approach, just as you cite some of these notable new third quarter deals?

Ashim Gupta, CFO

Yeah. So we see progress on the land size, Bryan; we see it slightly up as we look at the numbers right now. Our focus, as we move forward, though, is just overall expansion. So what we are really excited about is that we feel good we have a healthy pipeline. Customers are expanding. They are expanding into multiple elements of our platform in terms of the number of ELAs, etc. So both the land size we see slightly up, but we see progress in terms of customers wanting more of the platform that is very tied to our strategy in terms of driving further expansion and getting into the C levels as we outlined at Investor Day. We don’t provide guidance on free cash flow to clarify. However, we have mentioned that we aim for roughly cash flow neutrality. So when you review the numbers, you can expect to see our free cash flow being positive, bringing us closer to that neutrality; we are on track in those areas. Our free cash flow expansion will continue as we proceed, aligning with our earlier commitment to profitability.

Operator, Operator

Thank you. And our next question comes from Terry Tillman with Truist Securities. Please go ahead.

Terry Tillman, Analyst

Yeah. Thanks for taking my questions. Maybe the first question is a multi-partner, and then I had a follow-up. Rob, for you in terms of like earlier in the year, when you were putting forth some of these initiatives to optimize the business and improve execution. On the go-to-market side, I think there was the idea that there could be some disruption to go-to-market activities because of the things you are doing. Ultimately, have you seen about what you had planned for in terms of disruption to ARR or the business, or has it been less? And are you done with kind of like the right leadership team and the bench strength now? And then I have a follow-up.

Rob Enslin, Co-CEO

It's challenging to break down. However, I'm very pleased with how we've tested many of our initiatives in the U.S. and how we quickly established strong leadership there, which has led to effective execution. This has enabled us to expand those efforts to other regions. Our European operations are currently in excellent condition, thanks to Mark and his leadership team's stability and necessary changes. Additionally, we believe that bringing Lee on board in the Asia-Pacific region will yield positive results. We now have the framework and strategy to empower our sales team to effectively engage with their respective markets.

Terry Tillman, Analyst

That’s great to hear. You mentioned that the automation suite and Automation Cloud have seen triple-digit growth in annual recurring revenue. Do you think it's possible to maintain that triple-digit growth? Even though it’s early days for those solutions, could you provide an estimate of what that portion of annual recurring revenue might look like next year? Thank you.

Ashim Gupta, CFO

In terms of future guidance and cloud, it's important to highlight that we prioritize customer choice regarding their deployment methods. The team has performed well, and we continue to see progress and enthusiasm from our customers regarding our cloud-first strategy and upcoming product releases. When it comes to our modeling, we remain aligned with what we shared at Investor Day and previously regarding our future cloud mix. We believe we are consistent with our prior discussions.

Operator, Operator

Thank you. And our next question comes from Scott Berg with Needham. Please go ahead.

Scott Berg, Analyst

Hi, everyone. Thanks for taking the question. I guess I got a couple. To start with on the sales side. Ashim, you talked about deal sizes improving a little bit with the change in sales execution. One of the things we see often from companies, from vendors in this environment is actually trying to sell a little bit smaller, especially when the ROI and value proposition is high and has really good expansion rates. Is that an angle that you have looked at to help maybe try to address a smaller pain point initially during this challenging macro, just to get your foot in the door and then use your natural strength to expand from there?

Ashim Gupta, CFO

Yeah. Scott, that is the natural sales process that invested at UiPath and UiPath is really good at that, right, of acquiring smaller deals. So, that continues to show positive signs for us, and it’s one of the levers that we said early on, we would continue to invest in, and we continue to invest in. So we completely agree with you that’s something that we will continue to drive. We also mentioned that, as we change the segmentation, we will start to use propensity and graduation and we started to see that take impact. That allows us to take a quick acquisition and start to focus on how do we expand it, and so that strategy is what that we are executing and that will drive the deal sizes up. So it’s a combination of both, and we believe that the way that automation can play in this market with the NorthStar approach, we are well set to actually help customers also get some of the value returns for them at speed as well.

Scott Berg, Analyst

Got it. Very helpful. And then kind of a follow-up along the sales side there is, what are you hearing from customers in terms of automation and RPA on the priority list today? We continue to hear positive things about the technology, and obviously, it’s great for reducing costs and macro such as this. But are you seeing any changes in terms of how customers kind of look at this priority today?

Ashim Gupta, CFO

I see two perspectives on this. Customers are beginning to recognize how automation can help them meet their efficiency goals and enhance customer experiences. As Daniel mentioned, we excel at managing routine tasks, standardizing processes, and complying with regulations. Additionally, we are becoming proficient at implementing complex new business models across various sectors, which is a broader aspect of automation. We are confident there is a market opportunity in front of us, and we believe our strategy launched at Investor Day is well aligned with the direction the market is taking.

Operator, Operator

Thank you. And our next question comes from Alex Zukin with Wolfe Research. Please state your question.

Unidentified Analyst, Analyst

Hey, guys. This is Ryan on for Alex. Thanks for taking the question. So I just wanted to go back to the vertical question from earlier. You talked about a good win in financial services. I think you talked positively about healthcare. I know those are two areas where you are prioritizing efforts, but any verticals that you would maybe call out that underperformed your expectations or surprised you from a lander expansion perspective?

Rob Enslin, Co-CEO

I would say we saw strong performance in financial services, healthcare, technology, media, and telecom. I should have mentioned that we've done well with various government departments and are expanding there. Overall, I can't identify any real laggards, but there are definitely industries where we've seen stronger progress this quarter. I don't have a specific industry in mind that stands out as underperforming.

Ashim Gupta, CFO

No. I think we've discussed this before; it's very prevalent. I would also like to add to the previous question regarding our priorities. We meet with CFOs, and our platform aligns perfectly with what they prioritize. Rob and I recently visited a joint customer, one of the top construction companies in the U.S., and within just five or six minutes of using the platform, they were convinced. Now, we are focused on figuring out how to implement this.

Operator, Operator

Thank you. And our next question comes from Fred Havemeyer with Macquarie. Please state your question.

Fred Havemeyer, Analyst

Hi. Thank you. I wanted to ask about the solutions-based selling motion that was discussed back at Forward 5. I know it’s relatively early days here, but any thoughts or updates about this strategy, any sort of solution sets that are coming together based on perhaps some of your prior experience with professional services is particularly compelling or do you have any early feedback on how customers are responding to this?

Rob Enslin, Co-CEO

It's still too early to provide comprehensive customer feedback on this. We've launched one solution in the marketplace, and one of our clients, Bank of New York Mellon, is planning to use it to expedite their process. Additionally, we have four more packages that are either already launched or will be this month, which is a positive development. This approach is certainly enhancing our sales efforts and helping customers understand how our solution accelerators can improve their implementation speed and enable them to get started quickly. We're very optimistic about this, but it's premature to share complete feedback at this time. To be honest, we're really excited about it internally, and if I could release 100 of them tomorrow, I would.

Fred Havemeyer, Analyst

Okay. Thank you. I mean I am excited and looking forward to seeing what’s going to happen there. I also wanted to ask about the partnership with OutSystems as well; because there seems like a very natural alignment between what you are driving is an automation platform and what low/no-code companies are doing for their own enterprise application development acceleration cycles. But can you perhaps expand upon a bit of that partnership there and what it is that you can perhaps accomplish with an enterprise application platform as a partner?

Daniel Dines, Co-CEO

I think there are natural synergies between a low-code/no-code application platform and low-code/no-code automation platform like we have. We have built our platform with a very open mindset. So we have our own apps platform that is automation-centric, and I wanted to offer our customers the ability to build even more complex, like what we call Tier 1 type of applications. With OutSystems, you can even build custom CRMs or healthcare, medical, or ERP-type applications and they are tied very well into our automation platform. So we offer, I think, really end-to-end way of imagining new businesses, as Rob said very well.

Operator, Operator

Thank you. And our next question comes from Michael Turits with KeyBanc. Please state your question.

Michael Turits, Analyst

Hey, guys. Just one question for Rob. Rob, where are we in terms of the focus on selling more to the end user versus selling to IT? And to the extent that maybe in the past, it was more selling to the end user, has that created any issue with shelfware or licenses that are being in the hands of end users that now there’s perhaps more of a focus on the IT department?

Rob Enslin, Co-CEO

Michael, here’s my perspective: when we concentrate on our solution packages and platform pricing, as Ashim mentioned, our discussions with CFOs encompass the entire range of how we support their business. Regarding the issue of shelfware, it’s something we are actively addressing, and you'll notice upcoming adjustments to our compensation plans next year aimed at improving this situation. Our objective is to help customers achieve rapid time to revenue, particularly with the Global 2000, and the entire organization is committed to enhancing this process. Great. Well, everyone, thank you for joining us today. I would like to wish everyone a happy and healthy holiday season here in New York, where it feels like a holiday season in the streets; the lights are bright, and we feel really good about it, and we look forward to seeing many of you in the coming weeks. So happy and healthy holiday season to you and your family.

Operator, Operator

Thank you. And with that, we conclude today’s conference. All parties may disconnect. Have a great evening.