UiPath Inc. (PATH) Q2 2022 Earnings Call Transcript

UiPath Inc. (PATH -1.47%)
Q2 2022 Earnings Call
Sep 07, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the UiPath second-quarter 2022 earnings conference call and webcast. [Operator instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kelsey Turcotte, investor relations. Please go ahead.

Kelsey Turcotte -- Investor Relations

Good afternoon, and thank you for joining us today to review UiPath's second-quarter fiscal 2022 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 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 are posted on the UI Pass Investor Relations website, ir.uipath.com.

These materials include reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with U.S. GAAP. Unless otherwise specified, we will refer to non-GAAP metrics on today's call. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with U.S.

GAAP. They are included as additional clarifying items to aid investors in further understanding the company's second-quarter fiscal-year 2022 performance in addition to the impact these items and events have on the financial results. In addition, please note that we define ARR as annualized renewal run rate. This afternoon's call includes forward-looking statements about future events, including statements related to our market and future growth opportunities, our planned investments, our vision and the benefits of our product platform, customer behaviors, our customers' potential automation spend, the ability of our platform to deliver a return on investment to our customers and our financial guidance and the assumptions underlying such guidance.

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 earnings release and other reports filed with the SEC. Forward-looking statements made on this call reflect our views as of today. We undertake no obligation to update them.

Before I turn the call over to Daniel, 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. Finally, we'd like to invite you to attend FORWARD IV, our annual user conference. We will be holding this event in person in Las Vegas on October 4th through 6.

To register, please go to the home page of our Investor Relations website for further information. Now I would like to hand the call over to Daniel.

Daniel Dines -- Co-Founder and Chief Executive Officer

Thank you, Kelsey, and thank you to everyone for joining us this afternoon. The momentum in our business continued in our second fiscal quarter as ARR increased 60% year over year to $726.5 million, driven by record net new ARR of $73.9 million. We believe we have a long-term opportunity to drive durable growth and build a company that will transform how organizations compete, employees experience work, and companies interact with their customers. The opportunity to unlock human potential is vast, and we are in the very early stages of the market ahead of us.

This is why we plan to continue to invest across the business. We are hiring the best engineers to deliver market-leading capabilities across our platform, increase our sales teams to reach more customers faster, investing in partner enablement to help our customers scale and growing our vibrant community ecosystem that has crossed 1.5 million members. These are just a few of the investments that we expect will further widen the competitive moat and sustain our leadership position. Just a few short years ago, we introduced our first set of capabilities built on our unique combination of our UI automation, API management, and AI-based computer vision that address the needs of the core RPA market.

Back then, our customer count number in the hundreds. Since then, we have evolved those capabilities into an end-to-end platform that covers the full life cycle of automation, drives fast time to value and ROI for customers. As of the end of the second quarter, our customer base was more than 9,100. And the number of our customers who are leveraging our platform to accelerate automation is growing quickly.

We have 1,247 customers that accounted for at least $100,000 in ARR, up 59% from 785 in the second quarter of last year. This includes 118 customers at $1 million-plus in ARR, up 100% from 59. These numbers demonstrate not only the significant demand for automation, but demand for automation at scale. A great example is Handelsbanken, one of the largest banks in the Nordics, which chose to work with UiPath as the strategic part of their digitalization journey.

Our entire platform offering and vision was a key factor in their selection, and they now have plans to utilize attended robots, AI, Process Mining, and Task Mining with the goal of automating at least 75 processes within the next year. Task Mining, which was introduced this past spring, is generating a lot of interest from both new prospects and existing customers. It is a great example of our commitment to innovation and how we can help take the friction out of adoption. With Task Mining, customers can now discover and recommend new automations with the help of AI.

And when combined with Process Mining, like Handelsbanken has done in Automation Hub in the discovery pillar of our platform, we expect this will accelerate our customers' automation journey and drive adoption across our platform. Another example of scaling customers is Chipotle, which continues to lead digital transformation in retail and deliver on their vision for intelligent restaurants. Chipotle has been a UiPath Automation Cloud customer since 2019. And in the second quarter, they added Automation Hub and additional unattended robot to help manage and support their growing pipeline of automation opportunities.

They are also investigating UiPath Task Mining for automation opportunities in their restaurants. Not only for Chipotle, but for most of our customers, flexibility of deployment is an important consideration when they are choosing an automation partner. This is where Automation Cloud plays a key role in our end-to-end strategy. It allows customers to many software robots where they are needed, on-premise or in the cloud, through a single web portal delivered as a service.

And we continue to make Automation Cloud even easier to use, recently creating a tool to simplify the process of moving on-premises Orchestrator to Automation Cloud. This has helped customers such as Dentsu whose strategic vision is to elevate its employees' potential by integrated automation and AI in both internal processes and client-facing services. Automation Cloud has grown at an amazing pace from GA in December of 2019 to approximately 2,850 customers in 2021. In fact, more than 45% of our new customers purchased Automation Cloud in the quarter, many of them deploying in a hybrid environment.

Because of our ability to support customers across deployment bundles, we can put customer requirements first every time. Even with all of this recent innovation, including the spring release of 21.4 which has more customers using it within three months than any release in our history, we are constantly pushing to see what we can achieve next. One of those challenges is addressing unstructured data, which, if we can accomplish it, substantially broadens what customers can accomplish with automation and increases our total addressable market. Right now, we leverage AI and ML across our platform, offering more than 25 prebuilt machine learning models to help customers automate more quickly.

Customers of all sizes see the value in AI and ML and frequently ask us to deliver new functionality in the platform. In the second quarter, this led to the introduction of a new ML model to public preview that identifies key elements from text then classifies them to enhance automation in use cases like email processing. It also led to delivery of a highly requested new feature in Document Understanding. Document Understanding now sends validation test to end users via UiPath Action Center and also enables the auto training of ML models for continuous learning and accuracy improvements over time.

This is where we see the potential for semantic automation. We believe the market will evolve from what is now rules and instructions based, frequently requiring human intervention, to software that follows the process and learns how to emulate humans. Achieving semantic automation, as we envision it, is not going to be easy, and it is going to take time, but we have always been at the forefront of automation, and we are excited by the challenge. Our constant innovation results in broad recognition of our market leadership by practitioners, thought leaders, and industry analysts.

It also attracts partners to either join our go-to-market ecosystem or expand the depth of their relationship with us. Investing in partners to promote their success is fundamental to our strategy. Our UiPath Services Network, or USN, was designed to provide our partners with training, certification, and marketing programs. USN recognizes an elite network of service and delivery partners that work with our customers to offer skills on par with our professional services team.

This quarter, both EY and Cognizant successfully completed the rigorous requirements of USN certification. Before I turn the call over to Ashim, I want to quickly highlight Automation for Good, one of the many initiatives that demonstrate how we put our values into action. We believe in the transformative power of automation to bring out the best in people and the potential of people to bring out the best in our world. By way of example, automation has the power to help neurodiverse individuals finally retain meaningful employment.

The unemployment rate for autistic individuals is staggering with over 80% of individuals unable to find work. To help address this challenge, UiPath is supporting AutonomyWorks, a company that employs people with autism to deliver business services. You may have seen them on 60 Minutes. By creating software robots designed to make workloads manageable, this allows those with autism the opportunity to flourish in highly skilled roles and work with cutting-edge automation software.

We are proud of this partnership, which is just one example of the impact of our efforts around the world. Finally, we invite you to join our user conference, FORWARD IV, next month in Las Vegas, where you will get to see all of our latest innovations firsthand. We are very excited about the upcoming introduction of 21.10, our newest platform release, which will include multi-cloud, multi-platform capabilities that we believe will further expand our addressable market and leadership position. With that, I'll turn the call over to Ashim to discuss our Q2 performance and guidance in more detail.

Ashim Gupta -- Chief Financial Officer

Thank you, Daniel, and thank you, everyone, for joining us today. Before I get started, please note that all growth rates are year over year unless otherwise indicated. I am pleased with our second-quarter results, which yet again delivered meaningful growth at scale, driven by our market-leading automation platform that drives fast time-to-value and tangible benefits. In fact, in an upcoming IDC white paper sponsored by UiPath, IDC estimates that the economic benefits driven by UiPath will grow from $7 billion worldwide in 2021 to $55 billion in 2025.

Of the three benefit vectors: increased revenue, decreased expenses, and increased quality, the expected benefit from revenue gains will be larger than expense cuts and job growth from increased revenue to outpace job losses from expense reduction. We ended the second quarter with ARR of $726.5 million, up 60%. Net new ARR was $73.9 million, growing 33% driven by increased adoption of our core product portfolio, Automation Cloud, as well as new product offerings. We run the business and evaluate our performance based on ARR.

This quarter's strong results were driven once again by a world-class land-and-expand go-to-market model. New logos included the State of New Mexico, the New York Power Authority, and the University of Washington Medicine. In the second quarter, Prospect Medical started their automation journey with broad platform adoption, including test suite and insights. Accuity, a LexisNexis Risk Solutions company, selected UiPath Automation Cloud and plans to utilize Automation Hub as well as Task Mining among other products to stand up a citizen developer program.

On the expand side, our second-quarter dollar-based net retention rate of 144% continues to be best-in-class as customers expand platform adoption, add users and deploy more software robots. And even with these strong expansion metrics, the opportunity for our installed base to grow remains significant as we estimate that we have only captured 3% to 5% of their potential automation spend. Another way to look at this expansion dynamic is ARR lifetime value, or ARR LTV, and the purchasing frequency of our largest customers. For those of you who are not on the webcast, we have added two slides to our earnings deck for reference.

First, our customers by annual cohort. These cohorts demonstrate continual year-over-year expansion, with many of them making repeat purchases within the first 12 months. This kind of growth comes from our ability to quickly create value and drive meaningful ROI for our customers. Second, our top 25 customers, where we see the momentum driven by automation at scale.

This lens on our customer base shows not only the applicability of automation across a diverse set of business verticals, but also the repetitive nature of buying, which happens quarter after quarter. For example, a top 25 customer in the healthcare industry made their initial purchase to automate a handful of use cases in IT. Over time, they found additional automation opportunities across IT and shared services, ultimately setting up a Center of Excellence to service numerous federated automation teams around the globe. And while they have tied automation to an enterprise objective of saving more than $1 billion, they have also expanded their adoption by leveraging automation across subsidiaries, acquisitions and to drive top-line revenue, having adopted capabilities across our platform.

And finally, ARR LTV multiples. Among our top customers, ARR expansion has been strong, a theme that carries through to our top 25 customer cohort, which has grown to approximately 233 times their initial investment. If we expand the ARR LTV analysis to include our top 50 customers, they have an LTV of 90x. And what I see as the most illustrative of the potential of our customer base is the LTV for our top 100 customers of 62 times.

All of the customers in this top 100 cohort are included in the 118 customers that account for $1 million-plus in ARR. To ensure that as many of our customers as possible see these kinds of results, we work side by side with our partners, which now number more than 4,700, to enable and accelerate adoption. Partners also expand our global reach and bring us into strategic digital transformation programs. A great example of this is Shopify, a recently acquired UiPath customer.

Working with one of our big four partners, Shopify selected our automation platform to enable them to deliver an even better experience to their users. As always, we also look at ways to innovate. And in the second quarter, we signed a strategic partnership with Deloitte to invest in their Smart Factory at Wichita State. This joint ecosystem play is focused on creating the factory of the future and integrating industry-leading capabilities like UiPath to redefine how factories operate.

This will be a groundbreaking showcase of the benefits of software and physical robot collaboration. We are committed to investing in our partners and helping them scale their UiPath business. Now turning to our second quarter. I will be discussing results on a non-GAAP basis unless otherwise noted.

Second-quarter revenue increased 40% to $195.5 million compared to $139.4 million in the prior-year period. Looking at our pipeline, which is strong across geographies, we see the opportunity to move customers to deal structures with annual ramping, which we expect will lower our overall discounts. This structure creates better ROI for our customers, long-term engagement opportunities for our partners and will yield better overall margins for UiPath. It is also positive for ARR growth, which is our most important metric, but it can create short-term revenue variability due to the timing of license delivery and GAAP revenue recognition.

The durability of our long-term growth can be seen in remaining performance obligations, or RPO, which were $519.9 million in the second quarter, an increase of 80% year over year. Gross profit margin in the quarter was 86%, compared to 90% in the prior-year period. Software gross margin of 94% was offset by services gross margin of negative 65%. While we continue to run the services business to be approximately cash flow neutral, we expect the timing of revenue recognition as well as investment in customer adoption through partner enablement to create fluctuations in service gross margin over time.

Operating expenses for the second quarter totaled $161 million. We continue to invest in headcount across our sales force and customer success teams as well as engineering. GAAP operating loss of $97.8 million included $92.6 million of stock-based compensation expense related to our equity program. Non-GAAP operating income was $6.7 million compared to a loss of $7.6 million in the prior-year period.

Adjusted free cash flow in the quarter was negative $3.5 million compared to a positive $28.1 million in the prior-year period as we continue to invest in the business. We ended the quarter with $1.9 billion in cash, cash equivalents and marketable securities and no debt. Turning to our financial outlook. Guidance reflects our confidence in our market leadership, differentiated technology, and focused execution.

For the third-quarter fiscal 2022, we expect ARR to be in the range of $796 million to $798 million. As I have emphasized repeatedly, ARR is the key metric for measuring UiPath, and it lays a strong foundation for the company as we scale. We expect revenues to be in the range of $207 million to $209 million. As a reminder, given the variability introduced by ASC 606, we do not focus the business on short-term revenue growth, which can be lumpy quarter to quarter and dislocated from ARR and the long-term growth and health of the business.

And we expect non-GAAP operating loss to be in the range of negative $30 million to negative $15 million as we continue to invest in the business while still driving efficient operations. For fiscal 2022, we expect ARR to be in the range of $876 million to $881 million, an increase from prior guidance of $850 million to $855 million provided on our fiscal first-quarter 2022 earnings call. Before I conclude, I'd like to provide a few incremental modeling points. First, we expect sales and marketing spend to increase in the back half of the year.

This includes expenses related to our third quarter user conference, FORWARD, as we start to return to some of our pre-COVID marketing activities. Second, our guidance includes an assumption that there will be a return to office when possible. We continue to monitor the impact of the Delta variant on our teams worldwide and are actively supporting employees and their families where needed. And finally, we expect basic share count for the third quarter to be approximately 531 million shares outstanding.

In summary, the team delivered a strong second quarter, reflecting our market leadership and focus on execution. Looking ahead, we have a very strong pipeline, and we expect to continue our momentum in the second half of the year. In the near term, we are excited to host our user conference FORWARD IV. We invite you to come and speak with our executive team, customers, and partners, which include global tech sponsors, AWS and Microsoft, as well as Diamond sponsors, Accenture, CGI, Cognizant, Deloitte, and PwC.

This significant partner presence underscores their strong support for UiPath and the industry's largest dedicated automation event. We hope to see you there. We'll now take questions, and I'll turn over the call to the operator. Operator, please poll for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question today is coming from Raimo Lenschow from Barclays. Your line is now live.

Raimo Lenschow -- Barclays Investment Bank -- Analyst

Thank you, and congrats from me on a great quarter. One question on the demand signals you are seeing. You obviously delivered really well throughout the pandemic, but now that we're coming out, what do you see in terms of customer appetite to accelerate even further the digital transformation do more around your RPA offering, Process Mining offering, etc.? So how do you see this demand? Is it going to be stable for you? Or would you kind of think this could accelerate even further? Thank you.

Daniel Dines -- Co-Founder and Chief Executive Officer

Thank you for the question. We always said that COVID was net neutral for us. We've seen some business industries accelerating, where some deceleration in other industries. As we are getting, hopefully, in the last phase of COVID, we see solid demand in -- for our technology, for our platform.

We are seeing quite a solid pipeline for the second part of the year. And our extended line of products like Process Mining and Task Mining are starting to show really good traction with our customers. Maybe, Ashim, you want to add something?

Ashim Gupta -- Chief Financial Officer

No. I concur. I look at the long-term demand signals that we see. Daniel talked about the strength of our pipeline.

We love our competitive position. The awareness in the market around our platform is higher than ever, as you can see from a lot of the industry reports that have also come out. So we actually feel very positive about the long-term demand coming out of COVID.

Operator

Thank you. Our next question is coming from Keith Weiss from Morgan Stanley. Your line is now live.

Keith Weiss -- Morgan Stanley -- Analyst

Thank you guys for taking the question, and congrats on the very nice quarter. Ashim, I just wanted to dig in a little bit on the guidance. So you raised the full-year guide by about $26 million in ARR after beating Q2 by $24 million, and Q3 is about $20 million ahead of where consensus was. So I was just wondering, with that setup, are you signaling to us like consensus was a little bit too weak for Q3 and strong for Q4 and you're trying to readjust it? Or is there a demand signal in Q4 you're trying to make us aware? Because implicitly, Q4 comes down a little bit in terms of ARR.

Thank you.

Ashim Gupta -- Chief Financial Officer

Keith, we can follow up. But the way that I look at it is I really flowed through the beat from third quarter in terms of what we saw as consensus that was through there as we look out. In terms of just the overall demand signal, I would say everything that we talk about is from a macro trends, we still see in line for the year, which is a continued healthy best-in-class dollar-based net retention rate, a really steady execution on new logos. In terms of the specific guidance, really, as I look out to third and fourth quarter, I continue to guide based on what I see right in front of me, and our teams are continuing to execute in terms of driving the demand, driving the expansion in the field.

And I feel like we're set up to continue to execute well in the second half.

Operator

Thank you. Your next question is coming from Mark Murphy from JPMorgan. Your line is now live.

Mark Murphy -- JPMorgan Chase & Co. -- Analyst

Yes. Thank you very much, and I'll add my congrats. So Ashim, you had commented on seeing an opportunity to move customers, I think you said to contracts with annual ramping, but I'm not sure if I assimilated that correctly or heard that correctly. Could you just walk us through how those contracts are structured and maybe how quickly the mix might change? Any kind of -- any way we might play that through and roll that forward into our revenue forecast?

Ashim Gupta -- Chief Financial Officer

Yes. Sure. So when I talk about an annual ramping contract, one of the things that is really positive for us is digital transformation is a long-term trend. And what has happened with the strength of UiPath's platform is automation is a staple for the long-term requirements for customers to transform the way they work in digital transformation.

So what that means is instead of buying simple annual contracts, what we see a larger demand for is getting larger-term commitments from some of our customers. But the way they look at that is instead of buying 10,000 robots today, they may buy 1,000 robots today, 5,000 next year, 10,000 in year three. And those -- the license deliveries would happen into those years as we go down. And so one of the things that we look at is that we like that because that is better ROI for our customers.

And I -- when we think about the impact on financial metrics, two things. One is, remember, we -- and I repeat this, we really drive our company to ARR. From an ARR perspective, there is no impact that is there. Based on the way the contracts are structured, if license delivery happens in the out years, then that does have -- that creates variability in revenue because we only can recognize the revenue upon delivery of the license.

And so that is kind of the way that I think about it from a modeling perspective on revenue. But again, I stress ARR really, there's no impact, and that's how we drive the business.

Operator

Thank you. The next question today is coming from Terry Tillman from Truist Securities. Your line is now live.

Terrell Tillman -- Truist Securities -- Analyst

Yeah. Thanks, Daniel, Ashim, and Kelsey for taking my question. Congrats on the $1 million-plus deal productivity. Everyone likes seeing that.

My question just relates to all the partner activity. There's been lots of press releases from you and your partners in terms of working together. And I think you said you're up to 4,700 now. It's a two-part question in terms of, are they more helpful, this emerging partner ecosystem with landing customers, or more of the strategic expansion? And where are you with the productivity curve of these partners? Thank you.

Daniel Dines -- Co-Founder and Chief Executive Officer

We are very proud of growing our partner network. We've been able to grow to more than 4,700 partners, up from 4,400 last quarter. And the partner network is quite a big focus. It's a central piece of our growing strategy.

It's both for bringing new logos, but also quite a bit in expanding into our existing customers.

Ashim Gupta -- Chief Financial Officer

And then just to add on is in terms of the productivity curve, we see a lot of customers investing. So that is why you see a lot of the USN press releases that we have out there. E&Y, PwC, Cognizant, these just underscore the commitment of our customer -- of our partners to come up the productivity curve. At the same time, relative to the importance that this is going to play for our customers, we look at this as a tremendous opportunity that we'll continue to invest in.

And we invest in that directly with our partners as well as with our organizations to help enable our partners come up the curve and ensure the right service quality to our customers who are really counting on this to meet their ROI needs.

Operator

Thank you. Next question today is coming from Kirk Materne from Evercore ISI. Your line is now live.

Kirk Materne -- Evercore ISI -- Analyst

Yes. Thanks very much, and congrats on the strong ARR numbers. Daniel, can you just talk about -- actually, it follows up on Terry's question around partners. But are the partners getting trained up on the full portfolio? I guess are they starting just with sort of the more basic automation and then moving into process lining? It seemed to me that having your partners fully equipped, understanding Process Mining, the cloud automation technologies could help accelerate customer adoption of that.

I guess, how influential are they in terms of customers taking on the whole platform versus maybe just the starting automation points.

Daniel Dines -- Co-Founder and Chief Executive Officer

Great question. We are looking always to train our partners in the full array of components of our platform. And especially, we are seeing really growth interest in the Task Mining technology that was catching up quite well with our customers. And we aim to really make all of them capable of delivering this to the entire network of customers that we are having.

I believe that understanding the entire platform as a whole is central to how we want to scale up our big customers. This is why we basically invested in all the pillars of delivering automation. You cannot just -- if we start only with the core, what traditionally was used to be called RPA, there is just a certain number where you can get into really automating most of the manual repetitive tasks. But bringing all the pieces together, it's what increases the velocity of widespread adoption within our enterprise customers.

Operator

Thank you. Our next question is coming from Michael Turrin from Wells Fargo Securities. Your line is now live.

Michael Turrin -- Wells Fargo Securities -- Analyst

Hey there. Good afternoon, and thanks for taking the questions. Appreciate it. Certainly, appreciate it and it's clear the focus on ARR, given the moving pieces.

I wanted to hopefully just focus on the net new number there as well. The ARR growth has been pretty consistent at 60%. That net new number has bounced around a bit more in the past few quarters. Just wondering if there's anything you can add to help us smooth those trends.

And maybe if there's any impact on the uptick Automation Cloud is having there or anywhere else in the model would be helpful as well. Thank you.

Ashim Gupta -- Chief Financial Officer

Yeah. Look, I look at our incremental ARR numbers, the net new ARR that we've been posting, we're very pleased with it. It reflects the investment. It reflects both the strong dollar base -- the impact of the strong dollar-based net retention rate as well as the steady execution of new logos.

We continue to invest in our sales force. So as we continue to bring up our sales team and ramp up additional reps, which we've been doing, I feel very good about the overall trajectory to fulfill the pipeline that we have in front of us, which has grown and is very strong. In terms of Automation Cloud, I look at cloud overall, and I think, remember that the majority of what we do is in hybrid, meaning they are run at -- so from a revenue standpoint, from a demand standpoint, while it's a differentiator we'll win the deal, it doesn't really impact the difference of ARR, right? It's more of an impact on revenue. And then when you think about just the cloud metrics, Automation Cloud has grown to approximately 2,850 customers since its launching in December 2019.

Overall, the feedback from our customers is great. They love the investment in the road map, so they have choice. And they have different deployment options, which is a real strength and competitive differentiator for us as a company. And it's instrumental as we continue to win deals, and we continue to gain traction in the market.

Operator

Thank you. Next question today is coming from Siti Panigrahi from Mizuho. Your line is now live.

Siti Panigrahi -- Mizuho Securities -- Analyst

Thanks for taking my question. I just wanted to ask about adoption of this attended versus unattended bots. What sort of trends are you seeing? And is there the mix vary between new deals versus extension deals?

Daniel Dines -- Co-Founder and Chief Executive Officer

We didn't see any major change in the adoption of attended versus unattended this quarter. We are largely seeing the businesses adopting both, which is a big strength of our platform. We are the only platform that can provide best-in-class unattended and attended robots. And we have continued to invest on this front.

For instance, I am very proud that in this fall, we are going to release attended robots for Mac and for Mac users. So we are effectively expanding our total addressable market to -- from the people that are using Windows machines in the office to basically people that are using Macs. And in the future, we will go to all sorts of devices. So we continue to really look to win and extend our lead in the attended space.

While I think it's clear for everyone here that in the unattended space, we've been a clear leader for a long time.

Ashim Gupta -- Chief Financial Officer

And, Siti, just one thing that I think is important to emphasize, when you look at the use cases, as you think about driving durable growth, use cases like the contact center that -- sometimes we put attended with simplicity really, you need a robust attended offering to solve the complexities and drive the meaningful ROIs for our customers that is there. And that's important not just for the land but also for the expand. As people go and take advantage of more use cases, the need for both technologies working in concert is more important than ever for our customers.

Operator

Thank you. Next question today is coming from Scott Berg from Needham. Your line is now live.

Scott Berg -- Needham & Company -- Analyst

Hey, everyone. Congrats on the quarter, and thanks for taking my questions. I guess I have one because it's come up, I think, in every investor conversation I've had on you guys this quarter is, how should we think about the progression of the deployment model moving from your term model to a cloud model over time? You guys obviously highlighted some recent successes there, but it's probably the No. 1 question I get, considering most of the companies we all cover here do have a family of SaaS-based distribution today.

Thank you.

Ashim Gupta -- Chief Financial Officer

So when you think about it, I -- we've always talked about a shift which we've factored into a lot of the discussions we've had at the IPO time of around 20% movement to the cloud. So a lot of that is already baked into how we think about the future. We're on that trajectory. I think what we see is the demand for different cloud components is there.

So when I say 2,850 customers are using Automation Cloud, that doesn't necessarily mean -- that doesn't mean they're on a full SaaS offering. That means they're on a hybrid deployment offering, which uses some components that are in the cloud and some that is on-prem. And that is not forced by UiPath. We actually respect our customers' choices because they have certain infrastructure requirements, certain security requirements, their own journey to the cloud that we want to be able to support rather than forcing them into our mechanism.

The feedback and -- the other point on the cloud is our execution has been really world-class. When you look at what our product and engineering team has done with Ted Kummert's leadership, the feedback from the customers has been extraordinary. Customers like Chipotle, Accuity, which is a LexisNexis service company, they're starting their journey with the cloud, right? And so we like the mix that we're seeing. It's in line with what we've talked about historically.

And so far, I'd say we're going to continue to execute to that trend. There is no major deviations that are worth highlighting.

Operator

Thank you. Next question is coming from Matt Hedberg from RBC Capital Markets. Your line is now live.

Matt Hedberg -- RBC Capital Markets -- Analyst

Great. Thanks for taking my question, guys. Yeah. I wanted to ask about StudioX.

I know it's still a little early, but can you talk about how perhaps that's influencing expansion? And what it really means for -- from a seat count perspective to be able to expand the opportunity with that offering?

Daniel Dines -- Co-Founder and Chief Executive Officer

StudioX was for us perhaps the most successful product launch after our core RPA technology. And it effectively allowed us to go into the citizen development market and could extend quite a bit the people able to deliver our -- to deliver automation on the top of our platform. Now, we continue to invest in StudioX as a major tool to foster the community of citizen developers. We are going to extend it also to be available multi-platform.

So you will expect quite a bit of investment from us in the coming few quarters. It's -- right now, we are doing really a major advance into multi-cloud and multi-platform. And we are launching Linux-based robots. We just announced yesterday the public review available.

We are launching Mac support. We are going to launch early next year, the web-based StudioX that will make it even easier to adopt. But overall, we really believe that it's important to have a suite of tools that cater to a large array of options from professional developers to citizen developers and to all business users.

Operator

Thank you. Our next question is coming from Bryan Bergin from Cowen. Your line is now live.

Bryan Bergin -- Cowen and Company -- Analyst

Hey. Good afternoon. Thank you. I had a follow-up question on incremental ARR from new logos.

Can you just comment on the drivers there and how we should be thinking about incremental ARR from new logos within that 2022 outlook? Perhaps can you comment on average deal size you might be seeing in the pipeline as well?

Ashim Gupta -- Chief Financial Officer

Thanks for the question, Bryan. Average deal size to us has been relatively constant as customers tend to land in similar ways, as we speak, even though they may land at different portions of our platform. So we've always talked about that average land size somewhere between $15,000 and $25,000, somewhere in there. In terms of the factors that are driving new logos, one is the macro factors.

We see more and more awareness that is there. And at the same time, customers who are not familiar with automation still are looking for education. I do think that we are continuing to be in the early phase of this market. So the long-term trend in the pipeline, we feel really bullish about.

In terms of just execution internally, our team has done a great job with the investment that we've made in an inside sales team, both in the Americas as well as in Europe, that is driving really good execution and really great unit cost economics in terms of the customer acquisition cost. And that for us is something that is very positive, and we're going to continue to invest in those areas as they're generating the return that we expected and continuing to drive momentum there.

Operator

Thank you. Our next question today is coming from Michael Turits from KeyBanc. Your line is now live.

Steven Enders -- KeyBanc Capital Markets -- Analyst

Hey. Great. This is Steve Enders on for Michael. I just wanted to ask a little bit around the competitive environment that you're seeing out there.

It seems like there's been a lot of either M&A in the space and people moving into adjacent areas of the automation software market. But have you seen any kind of change in the landscape in the past quarter in the past year or so?

Daniel Dines -- Co-Founder and Chief Executive Officer

So we all know this is a big market growing quickly, and automation is the central piece of the digital transformation. So obviously, all major players in the cloud and the business applications are in our space. We -- the -- I think the most important movement in this market was done by Salesforce that acquired a small German company. And it played out -- we kind of expected this.

And I think it made sense for Salesforce. And what is quite telling is that they did this small RPA company to the new suites of products. So Salesforce is seeing a consolidation between low-code/no-code integration and automation. And this is exactly what we have told the market for a long time, and we have expanded into these areas for a long time.

With this big release in the fall, you should expect really a smooth integration of our Cloud Elements acquisition that was done in the beginning of this year. So we will make a very well-oiled machine around automation with low-code/no-code that we have introduced a year or something ago. And now we're really combining UI automation and API automation in a very good integrated package. We believe that our angle toward this consolidated platform is our angle that comes from emulating people is really the one -- that is the winning angle.

All these small acquisitions made me think that still the big software players don't understand how difficult it is to build emulation software. This is our bread and butter. We have built it for a long time. And starting from this angle, we -- it gives us a tremendous opportunity to extend our reach to the entire consolidated automation space.

Operator

Thank you. Next question is coming from Fred Havemeyer from Macquarie. Your line is now live.

Fred Havemeyer -- Macquarie Group -- Analyst

Hey. Thank you, and a question for Ashim. Now, the net -- ARR is clearly your metric for momentum here. And I wanted to ask also about the mapping of duration and ARR as that flows through the rest of your model.

Because as I'm looking at this, it really looks like we're seeing less multiyear upfront deals, certainly, to your point that you are shifting more toward annual deals across the board. And between that and potentially fewer multiyear annual deals based on what I'm looking at here, it looks like that's having a number of impacts across your model in revenue as well as potentially in deferred revenue that you have in your balance sheet. So, Ashim, if you could, could you potentially walk us through some of those impacts? And then to the extent that you can provide a bit of color on some of the duration mix shifts that we're seeing here in this model. Thank you.

Ashim Gupta -- Chief Financial Officer

Sure. So first thing to note is, remember, you can look at duration in two ways. There's billing duration and there's contract duration. Billing duration means typically prepaid deals that we have there, and contract duration just means the duration of the contract regardless of payments.

The majority of our deals are 1 year, and we are -- we continue to emphasize that, as you said, with the emphasis on ARR. That being said, our contract duration is steady. When you adjust for some of the large -- some unusuals that are there, year-over-year contract duration, you do see toward a trend for us that is shorter as we put more emphasis on ARR versus history. Billings duration is down, and that is because we've deemphasized prepaid deals given our cash position and our gross retention rate.

So when your gross retention rate is 98%, we don't feel kind of compelled to trade any type of discount for long for getting the cash in the door right today. We're able to make better and better economic decisions from the position of strength. That being said, this is all going to fluctuate based on the mix of deals, and I talked about it earlier. There is an opportunity to move customers to deal structures with annual ramping, which does provide lower overall discount levels.

It's better ROI for our customers as well as they can really lock in to their automation needs that they have today and provides more predictability for themselves as well as their engagement opportunities for our partners. That shift is positive for ARR growth. But like I mentioned earlier to an earlier question, it can create short-term variability. And if there's any confusion on ramp, remember what I mean is you can buy robots of 100 per year for a three-year deal or you can buy robots of 100, 200, 300 in a deal.

And then the licenses for that additional 100 per year gets delivered in subsequent years. which is why there is -- why that creates variability in terms of revenue recognition. So I know that it's not the simplest of subjects, but happy to address that further in follow-ups.

Operator

Thank you. Our next question today is coming from DJ Hynes from Canaccord. Your line is now live.

DJ Hynes -- Canaccord Genuity -- Analyst

Hey. Thanks, guys, and I'll add my congrats on the quarter. You guys have talked a lot with us about the synergies between RPA and AI and ML. I'm just curious, like, how do you explain this to prospective customers? And how influential would you say this in deal cycles today? I'm trying to get a sense for where we are in terms of tactical deployments versus maybe more strategic adoption, if that makes sense.

Daniel Dines -- Co-Founder and Chief Executive Officer

We have introduced recently an overarching concept that we call semantic automation. And this is an umbrella term that define how we are going to approach the next phase of automation that is becoming closer to how human workers perform their job. In the early phase of RPA, we were after more repetitive, completely rule-based tasks. And our robots never really understood what we were doing, what they were doing there.

In this next phase, we aim to bring a lot more knowledge about the task themselves and about the data that these processes are moving from 1 application to the other. So this is a natural evolution that marries the world of automation with the world of AI. AI is quintessential into reducing the gap between how robots operate and how people operate. And we are making huge investments.

We are making each -- you should expect from us each quarter from on incremental progress toward this overarching vision. For instance, this release, this major release in October, we'll see the introduction of a technology called Forms AI, which is capable of creating nice user interface forms based strictly on the data. So it's making -- creating for our customers even easier, it's creating this beautiful form that allows interaction between humans and robots. And we will have incrementally more and more of this feature that really command a lot of advanced AI techniques.

Operator

Thank you. Our next question today is coming from Brad Sills from Bank of America Securities. Your line is now live.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Great. Hey, guys. Thanks for taking my question. Just one on the expansion activity.

Real healthy year holding in at that 144 net retention level. Wondering what is -- what does it take for a customer to kind of maybe cross that threshold? Is there a tipping point where you see multiple departments, a certain number of robots when you start to really see that acceleration of expansion into some of those metrics you provided for top 25, top 50, top 100 accounts? And then how could the Task Miner help potentially accelerate that trend? Thank you so much.

Daniel Dines -- Co-Founder and Chief Executive Officer

Well, our strategy was always to have customers accelerate their automation with the full platform. This is really the best way to quickly achieve meaningful return on investments. Our customers typically start with a handful of use cases to promote the return and expand when they realize the potential. Accelerating automation and ensuring customer success is truly a combination of technology and partners.

Our technology provides a full slate automation platform that is really instrumental into the large-scale adoption and clearly increasing the net retention rate, while our partners are instrumental into making this adoption happening at speed. And I'm sure Ashim has more to add in terms of practical numbers.

Ashim Gupta -- Chief Financial Officer

Yes. So when you look at our dollar-based net retention, you're right, Brad, we're very pleased with 144%. And we're very pleased with the percentages of customers greater than $100,000, which is crossing 1,247, which is up 50%. And $1 million-plus customers, all growing 100% plus, at 118 right now.

When you ask about what's the tipping point, I'd say there's a couple of things. One is definitely interdepartmental buying. That's a huge opportunity for us that we continue to see customers take advantage of. In terms of the dollar base, the reason why we really track that $100,000 mark, that really is what we start thinking about as a scale velocity, where it shows that automation is a hugely strategic part of a customer's digital transformation journey.

It has meaningful presence and investment in -- by our customers. And we are very happy to see it, which drives the LTV that I talked about earlier, that's really that escape velocity that gets you to that 62 times for the top 100 in terms of expansion versus its original deal, 90 times for our top 50 and 233 times for our top 25. So that's how I think about the tipping point, primarily is use case expansion and department expansion.

Operator

Thank you. Our final question today is coming from Steve Koenig from SMBC Nikko. Your line is now live.

Steve Koenig -- SMBC Nikko Securities -- Analyst

Hi, gentlemen. Hey. Thanks for squeezing me in. I'll just ask a two-parter here.

First one, just to put a little bit of a finer point on an earlier question about ARR from new logos. I was wondering maybe just some color on the increment from new logos versus net retention. And are you seeing that new logo contribution turnaround from last year? I think it was down a little bit in the pandemic. And then just secondly, on the product road map, I'd be interested, Daniel, any color from you as we're seeing voice UIs and chatbots proliferate, kind of what are the opportunities for RPA here and the integration possibilities building on what you have today? Thanks very much.

Ashim Gupta -- Chief Financial Officer

So I'll start with the first part. So in terms of new logos, we see roughly greater than 500 new logos that get added every quarter. We've been seeing that trend steady, and we feel very good about it for some of the questions discussed earlier. Roughly, I would say $17 million of our incremental ARR comes from that new logo -- the new logo acquisition.

And then one thing that's important is our gross retention rate is 98%. So having a robust new logo without, so to speak, a leaky pod is -- really supports why you see such robust growth numbers. And that speaks to the strength of our position and the importance of automation in the market and why we feel so strongly about durable growth. I'll pass it over to Daniel for the second part of the question.

Daniel Dines -- Co-Founder and Chief Executive Officer

Yes. I would like to make a case here that with this release, this fork, we are clearly expanding our market. Linux robots will deliver a faster, more flexible, more efficient back-end automation while extending on the Mac computers will allow us to really present our offering to a large number of Mac users that are among our customers. That was one of the most requested feature for us.

I'm saying this news, to us, it's very important to put the technology in the hands of as many customers as possible. And you mentioned, if I heard correctly, about voice AI. We believe conversational AI is going to be a clear part of any big automation platform. To us, we regard it as a suspicious of low-code/no-code application development.

And we -- it's clearly something that we are eyeing on our road map.

Operator

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Daniel for any further or closing comments.

Daniel Dines -- Co-Founder and Chief Executive Officer

I want to thank you all very much for participating in this afternoon's call. I also want to thank the UiPath team for their hard work, our partners for their dedication, to our customers and our shareholders for your ongoing support. We look forward to speaking with many of you throughout the quarter. Thank you.

Operator

[Operator signoff]

Duration: 64 minutes

Call participants:

Kelsey Turcotte -- Investor Relations

Daniel Dines -- Co-Founder and Chief Executive Officer

Ashim Gupta -- Chief Financial Officer

Raimo Lenschow -- Barclays Investment Bank -- Analyst

Keith Weiss -- Morgan Stanley -- Analyst

Mark Murphy -- JPMorgan Chase & Co. -- Analyst

Terrell Tillman -- Truist Securities -- Analyst

Kirk Materne -- Evercore ISI -- Analyst

Michael Turrin -- Wells Fargo Securities -- Analyst

Siti Panigrahi -- Mizuho Securities -- Analyst

Scott Berg -- Needham & Company -- Analyst

Matt Hedberg -- RBC Capital Markets -- Analyst

Bryan Bergin -- Cowen and Company -- Analyst

Steven Enders -- KeyBanc Capital Markets -- Analyst

Fred Havemeyer -- Macquarie Group -- Analyst

DJ Hynes -- Canaccord Genuity -- Analyst

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Steve Koenig -- SMBC Nikko Securities -- Analyst

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