Upland Software Reports Third Quarter 2021 Financial Results

Rhea-AI Summary

Upland Software (Nasdaq: UPLD) reported Q3 2021 financial results with total revenue of $76.1 million, a 3% increase year-over-year. Subscription revenue rose by 2% to $72.3 million. The GAAP net loss was $11.0 million or $0.36 per share, an improvement from Q3 2020. Adjusted EBITDA held steady at $25.0 million, accounting for 33% of total revenue. However, Upland revised its Q4 2021 guidance, anticipating total revenue between $73.2 million and $77.2 million, reflecting a potential 4% decline in recurring revenue.

Positive

• Total revenue increased by 3% year-over-year.
• Subscription revenue rose by 2%.
• GAAP net loss improved from $11.3 million to $11.0 million.
• Adjusted EBITDA remained consistent at $25.0 million.

Negative

• GAAP operating cash flow decreased to $5.3 million from $18.7 million.
• Free cash flow dropped to $4.9 million from $18.5 million.
• Revised Q4 total revenue guidance indicates a potential 4% decline in recurring revenue.

AUSTIN, Texas--(BUSINESS WIRE)-- Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the third quarter of 2021 and revised guidance for its fourth quarter and full year of 2021.

Third Quarter 2021 Financial Highlights

• Total revenue was $76.1 million, an increase of 3% from $74.2 million in the third quarter of 2020.
• Subscription and support revenue was $72.3 million, an increase of 2% from $71.0 million in the third quarter of 2020.
• GAAP net loss was $11.0 million, or a loss of $0.36 cents per share, compared to a GAAP net loss of $11.3 million, or a loss of $0.42 cents per share, in the third quarter of 2020.
• Adjusted EBITDA was $25.0 million, or 33% of total revenue, compared to $25.0 million, or 34% of total revenue, in the third quarter of 2020.
• GAAP operating cash flow was $5.3 million, compared to GAAP operating cash flow of $18.7 million in the third quarter of 2020. Free cash flow was $4.9 million, compared to free cash flow of $18.5 million in the third quarter of 2020.
• Cash on hand as of the end of the third quarter of 2021 was $179.6 million.

“In Q3 we posted strong Adjusted EBITDA and remained on track to achieve our free cash flow generation targets for the year,” said Jack McDonald, Upland’s chairman and chief executive officer. “We did not see in Q3 the uptick in new logo bookings and renewals we had expected,” he added. “We remain determined to improve our sales performance and note that our focus throughout this year on securing multi-year customer renewals and expansions means a higher percentage of our revenue is now contracted through 2022, which supports improved net dollar retention rates next year,” he added. “Finally, we remain active in the market for additional acquisition opportunities.”

Third Quarter Business Highlights

• We expanded relationships with 281 existing customers, 45 of which were major expansions. We also welcomed 109 new customers to Upland in the third quarter, including 27 new major customers.
• We secured multiple six-figure long-term renewals and expansions with major global Financial Services firms. Within this industry, there is growing interest in our knowledge management product library to help drive and facilitate more effective, compliance-led knowledge sharing due to ever-increasing and evolving global regulations.
• We launched Altify Sales Reference Manager, a new reference application built natively on the Salesforce platform. This product helps B2B sellers widen their pools of reference accounts, resulting in enhanced deal velocity and increased win rates, directly from within Salesforce.
• And our InGenius product became one of the first Service Cloud Voice for Partner Telephony integrators available on the Salesforce AppExchange, helping customers maintain their existing telecommunications investment and infrastructure while taking advantage of the new Service Cloud Voice environment within Salesforce.

Business Outlook

For the quarter ending December 31, 2021, Upland expects reported total revenue to be between $73.2 and $77.2 million, including subscription and support revenue between $70.2 and $73.8 million, for decline in recurring revenue of 4% at the mid-point over the quarter-ended December 31, 2020. Fourth quarter 2021 Adjusted EBITDA is expected to be between $23.4 and $25.4 million, for an Adjusted EBITDA margin of 32% at the mid-point. This Adjusted EBITDA guide at the mid-point is a decline of 8% from the quarter-ended December 31, 2020. By way of comparison, Q4 2020 had $6.6 million of political messaging revenue, which will not repeat in Q4 of 2021.

For the full year ending December 31, 2021, Upland expects reported total revenue to be between $299.5 and $303.5 million, including subscription and support revenue between $285.5 and $289.1 million, for growth in recurring revenue of 4% at the mid-point over the year ended December 31, 2020. Full year 2021 Adjusted EBITDA is expected to be between $95.0 and $97.0 million, for an Adjusted EBITDA margin of 32% at the mid-point. This Adjusted EBITDA guide at the midpoint is a reduction of 4% over the year ended December 31, 2020. By way of comparison, 2020 had $18.2 million of political messaging revenue, which will not repeat in 2021.

Conference Call Details

Upland's executive team will host a live conference call and webcast at 4:00 p.m. Central Time, 5:00 p.m. Eastern Time today to review Upland’s financial results and outlook for the business. The call can be accessed via a webcast on investor.uplandsoftware.com, or by dialing 1-844-200-6205 in the United States or +1-929-526-1599 if outside the United States. Attendees will need to use access code 303259 to join the call. This webcast will contain forward-looking statements and other material information regarding Upland’s financial and operating results.

Following the completion of the conference call, a recording of the webcast will be made available at investor.uplandsoftware.com for twelve months.

About Upland Software

Upland helps global businesses accelerate digital transformation with a powerful cloud software library that provides choice, flexibility, and value. Our growing library of products delivers the "last mile" plug-in processes, reporting, and job specific workflows that major cloud platforms and homegrown systems don’t provide. We focus on specific business challenges and support every corner of the organization, operating at scale and delivering quick time to value for our 1,700+ enterprise customers. To learn more, visit www.uplandsoftware.com.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Adjusted EBITDA, non-GAAP net income (loss), non-GAAP net income (loss) per share and free cash flow.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, such as our revenues excluding the impact for foreign currency fluctuations or our operating performance excluding not only non-cash charges, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and they are used by our institutional investors and the analyst community to help them analyze the health of our business. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the tables provided below in this release.

We are unable to reconcile any forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Upland defines Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus net income (loss) from discontinued operations, depreciation and amortization expense, interest expense, net, other expense (income), net, provision for income taxes, stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, and purchase accounting adjustments for deferred revenue.

Upland defines non-GAAP net income (loss) as net income (loss), calculated in accordance with GAAP, plus, amortization of purchased intangible assets, amortization of debt discount, loss on debt extinguishment, stock-based compensation expenses, acquisition-related expenses, non-recurring litigation expenses, purchase accounting adjustments for deferred revenue, non-recurring provision for income tax, and the related tax effect of the adjustments above.

Upland defines free cash flow as GAAP operating cash flow less purchases of property and equipment.

Upland defines major accounts as accounts with greater than or equal to $25,000 in annual recurring revenue.

Upland defines major expansions as existing customers who expanded the amount of annual recurring revenue under their contract by at least $25,000.

Upland defines cash gross margin as product revenue less subscription and support cost of sales, excluding depreciation & amortization.

Forward-looking Statements

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance, including our guidance related to future performance, and are subject to substantial risks, uncertainties and assumptions. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. Accordingly, you should not place undue reliance on these forward-looking statements. Forward-looking statements include any statement that does not directly relate to any historical or current fact and often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "hope," "predict," "could," "should," "would," "project," or the negative or plural of these words or similar expressions, although not all forward-looking statements contain these words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but are not limited to: our financial performance and our ability to achieve, sustain or increase profitability or predict future results; our ability to attract and retain customers; our ability to deliver high-quality customer service; the growth of demand for enterprise work management applications; our plans regarding, and our ability to effectively manage, our growth; our plans regarding future acquisitions and our ability to consummate and integrate acquisitions; maintaining our senior management and key personnel; our ability to maintain and expand our direct sales organization; our ability to obtain financing in the future on acceptable terms or at all; the performance of our resellers; our ability to adapt to changing market conditions and competition; our ability to successfully enter new markets and manage our international expansion; the operation and reliability of our third-party data centers and other service providers; our ability to adapt to technological change and continue to innovate; our ability to integrate our applications with other software applications; our ability to comply with privacy laws and regulations; and factors that could affect our business and financial results identified in Upland's filings with the Securities and Exchange Commission (the "SEC"), including Upland's most recent 10-K filed with the SEC. Additional information will also be set forth in Upland's future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Upland makes with the SEC. The forward-looking statements herein represent Upland's views as of the date of this press release, and these views could change. However, while Upland may elect to update these forward-looking statements at some point in the future, Upland specifically disclaims any obligation to do so, except as required by law. These forward-looking statements should not be relied upon as representing the views of Upland as of any date subsequent to the date of this press release.

Upland Software, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data)
	Three Months Ended September 30,										Nine Months Ended September 30,
	2021					2020					2021					2020
	(unaudited)					(unaudited)					(unaudited)					(unaudited)
Revenue:
Subscription and support	$	72,264				$	70,992				$	215,322				$	202,582
Perpetual license	684					411					1,451					1,263
Total product revenue	72,948					71,403					216,773					203,845
Professional services	3,105					2,781					9,513					9,686
Total revenue	76,053					74,184					226,286					213,531
Cost of revenue:
Subscription and support	22,968					23,562					68,811					64,701
Professional services and other	1,848					2,021					5,444					6,755
Total cost of revenue	24,816					25,583					74,255					71,456
Gross profit	51,237					48,601					152,031					142,075
Operating expenses:
Sales and marketing	14,364					11,760					41,094					34,511
Research and development	10,441					9,967					32,494					29,379
General and administrative	17,725					16,864					61,286					51,195
Depreciation and amortization	10,764					9,117					30,785					27,425
Acquisition-related expenses	3,685					3,574					18,805					24,513
Total operating expenses	56,979					51,282					184,464					167,023
Income (loss) from operations	(5,742		)			(2,681		)			(32,433		)			(24,948		)
Other expense:
Interest expense, net	(7,971		)			(8,078		)			(23,700		)			(23,594		)
Other income (expense), net	(650		)			598					(812		)			(819		)
Total other expense	(8,621		)			(7,480		)			(24,512		)			(24,413		)
Loss before benefit from (provision for) income taxes	(14,363		)			(10,161		)			(56,945		)			(49,361		)
Benefit from (provision for) income taxes	3,348					(1,149		)			6,204					3,811
Net loss	$	(11,015	)			$	(11,310	)			$	(50,741	)			$	(45,550	)
Net loss per common share, basic and diluted	$	(0.36	)			$	(0.42	)			$	(1.68	)			$	(1.77	)
Weighted-average common shares outstanding, basic and diluted	30,428,675					27,220,134					30,167,171					25,725,495

Upland Software, Inc. Condensed Consolidated Balance Sheets (in thousands)
	September 30,					December 31,
	2021					2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	179,584				$	250,029
Accounts receivable, net of allowance	37,076					44,472
Deferred commissions, current	8,721					5,784
Unbilled receivables	5,847					4,561
Prepaid and other	8,560					12,694
Total current assets	239,788					317,540
Tax credits receivable	3,054					2,427
Property and equipment, net	3,035					2,778
Operating lease right-of-use asset	6,990					10,124
Intangible assets, net	292,807					279,975
Goodwill	460,178					383,598
Deferred commissions, noncurrent	14,168					12,962
Other assets	1,691					1,816
Total assets	$	1,021,711				$	1,011,220
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	16,181				$	5,395
Accrued compensation	11,259					8,138
Accrued expenses and other current liabilities	9,960					13,438
Deferred revenue	90,368					87,552
Liabilities due to sellers of businesses	10,531					416
Operating lease liabilities, current	3,555					3,315
Current maturities of notes payable	3,158					3,166
Total current liabilities	145,012					121,420
Notes payable, less current maturities	515,958					518,437
Deferred revenue, noncurrent	2,075					1,587
Operating lease liabilities, noncurrent	7,650					8,387
Noncurrent deferred tax liability, net	27,484					24,092
Interest rate swap liabilities	15,642					30,032
Other long-term liabilities	844					650
Total liabilities	714,665					704,605
Stockholders’ equity:
Common stock	3					3
Additional paid-in capital	558,495					515,219
Accumulated other comprehensive loss	(18,338		)			(26,234		)
Accumulated deficit	(233,114		)			(182,373		)
Total stockholders’ equity	307,046					306,615
Total liabilities and stockholders’ equity	$	1,021,711				$	1,011,220

Upland Software, Inc. Condensed Consolidated Statements of Cash Flows (in thousands)
	Three Months Ended September 30,										Nine Months Ended September 30,
	2021					2020					2021					2020
	(unaudited)					(unaudited)					(unaudited)					(unaudited)
Operating activities
Net loss	$	(11,015	)			$	(11,310	)			$	(50,741	)			$	(45,550	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	13,751					11,696					39,420					35,091
Change in fair value of liabilities due to sellers of businesses	(774		)			155					(3,503		)			155
Deferred income taxes	(4,337		)			1,639					(7,726		)			(3,346		)
Amortization of deferred costs	2,435					1,252					6,283					3,172
Foreign currency re-measurement loss	8					(186		)			18					311
Non-cash interest and other expense	567					561					1,682					1,669
Non-cash stock compensation expense	12,047					10,963					43,421					31,263
Non-cash loss on retirement of fixed assets	2					473					2					473
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable	1,574					7,952					11,748					13,140
Prepaids and other	(41		)			(3,350		)			(3,672		)			(10,093		)
Accounts payable	732					4,476					6,647					(1,782		)
Accrued expenses and other liabilities	(5,687		)			(1,843		)			(8,111		)			(8,944		)
Deferred revenue	(3,924		)			(3,822		)			(6,822		)			(1,407		)
Net cash provided by operating activities	5,338					18,656					28,646					14,152
Investing activities
Purchase of property and equipment	(458		)			(137		)			(965		)			(833		)
Purchase of customer relationships	—					—					—					(201		)
Purchase business combinations, net of cash acquired	—					—					(92,417		)			(67,651		)
Net cash used in investing activities	(458		)			(137		)			(93,382		)			(68,685		)
Financing activities
Payments on finance leases	(8		)			(3		)			(12		)			(86		)
Proceeds from notes payable, net of issuance costs	(7		)			(27		)			(120		)			(169		)
Payments on notes payable	(1,350		)			(1,350		)			(4,050		)			(4,050		)
Taxes paid related to net share settlement of equity awards	(373		)			—					(373		)			(2,140		)
Issuance of common stock, net of issuance costs	50					130,133					228					130,174
Additional consideration paid to sellers of businesses	(27		)			(2,072		)			(769		)			(11,652		)
Net cash provided by (used in) financing activities	(1,715		)			126,681					(5,096		)			112,077
Effect of exchange rate fluctuations on cash	(120		)			(138		)			(613		)			404
Change in cash and cash equivalents	3,045					145,062					(70,445		)			57,948
Cash and cash equivalents, beginning of period	176,539					87,910					250,029					175,024
Cash and cash equivalents, end of period	$	179,584				$	232,972				$	179,584				$	232,972

Upland Software, Inc. Reconciliation of Adjusted EBITDA (in thousands, unaudited)
	Three Months Ended September 30,										Nine Months Ended September 30,
	2021					2020					2021					2020
Reconciliation of net loss to Adjusted EBITDA:
Net loss	$	(11,015	)			$	(11,310	)			$	(50,741	)			$	(45,550	)
Add:
Depreciation and amortization expense	13,751					11,696					39,420					35,091
Interest expense, net	7,971					8,078					23,700					23,594
Other expense (income), net	650					(598		)			812					819
Benefit from income taxes	(3,348		)			1,149					(6,204		)			(3,811		)
Stock-based compensation expense	12,047					10,963					43,421					31,263
Acquisition-related expense	3,685					3,574					18,805					24,513
Purchase accounting deferred revenue discount	1,275					1,408					2,375					7,381
Adjusted EBITDA	$	25,016				$	24,960				$	71,588				$	73,300

Upland Software, Inc. Reconciliation of Non-GAAP Net Loss and Non-GAAP EPS (in thousands, except share and per share data, unaudited)
	Three Months Ended September 30,										Nine Months Ended September 30,
	2021					2020					2021					2020
Reconciliation of net loss to non-GAAP net income:
Net loss	$	(11,015	)			$	(11,310	)			$	(50,741	)			$	(45,550	)
Add:
Stock-based compensation expense	12,047					10,963					43,421					31,263
Amortization of purchased intangibles	13,201					11,222					37,946					33,587
Amortization of debt discount	567					561					1,682					1,669
Acquisition-related expense	3,685					3,574					18,805					24,513
Purchase accounting deferred revenue discount	1,275					1,408					2,375					7,381
Tax effect of adjustments above	(1,973		)			(1,275		)			(4,648		)			(4,660		)
Non-GAAP net income	$	17,787				$	15,143				$	48,840				$	48,203
Weighted average ordinary shares outstanding, basic	30,428,675					27,220,134					30,167,171					25,725,495
Weighted average ordinary shares outstanding, diluted	30,951,123					27,751,221					30,817,435					26,149,617
Non-GAAP earnings per share, basic	$	0.58				$	0.56				$	1.62				$	1.87
Non-GAAP earnings per share, diluted	$	0.57				$	0.55				$	1.58				$	1.84

Upland Software, Inc. Reconciliation of Operating Cash Flow to Free Cash Flow (in thousands, unaudited)
	Three Months Ended September 30,										Nine Months Ended September 30,
	2021					2020					2021					2020
Reconciliation of Operating Cash Flow to Free Cash Flow:
Net cash provided by operating activities	$	5,338				$	18,656				$	28,646				$	14,152
Less: Purchase of Property and Equipment	(458		)			(137		)			(965		)			(833		)
Free Cash Flow	$	4,880				$	18,519				$	27,681				$	13,319

Upland Software, Inc. Supplemental Financial Information (in thousands, unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Stock-based compensation:
Cost of revenue	$	539			$	624			$	1,544			$	1,512
Research and development	671				1,005				2,327				2,639
Sales and marketing	1,636				968				4,392				2,415
General and administrative	9,201				8,366				35,158				24,697
Total	$	12,047			$	10,963			$	43,421			$	31,263

	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Depreciation:
Cost of revenue	$	5			$	37			$	27			$	153
Operating expense	545				437				1,447				1,351
Total	$	550			$	474			$	1,474			$	1,504
Amortization:
Cost of revenue	$	2,982			$	2,542			$	8,608			$	7,513
Operating expense	10,219				8,680				29,338				26,074
Total	$	13,201			$	11,222			$	37,946			$	33,587

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103006162/en/

Investor Relations Contact:

Mike Hill

investor-relations@uplandsoftware.com

512-960-1031

Media Contact:

Kendell Kelton

media@uplandsoftware.com

678-575-7428

Source: Upland Software Inc.

FAQ

What were Upland Software's Q3 2021 revenue figures?

Upland Software reported total revenue of $76.1 million for Q3 2021.

How did Upland Software's GAAP net loss change in Q3 2021?

The GAAP net loss for Q3 2021 was $11.0 million, improving from a loss of $11.3 million in Q3 2020.

What is Upland Software's guidance for Q4 2021?

Upland expects Q4 2021 total revenue between $73.2 million and $77.2 million, reflecting a potential 4% decline in recurring revenue.

What was Upland's Adjusted EBITDA for Q3 2021?

Upland reported Adjusted EBITDA of $25.0 million for Q3 2021, which is 33% of total revenue.

What are the expectations for Upland's full year 2021 revenue?

Upland anticipates full year 2021 total revenue between $299.5 million and $303.5 million.