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Upland Software Reports Record Third Quarter 2017 Financial Results with 36% Revenue Growth and Raises Full Year 2017 Guidance
Company achieves greater than $100 million annualized revenue run rate for the first time.

AUSTIN, Texas, Nov. 9, 2017 /PRNewswire/ -- Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based Enterprise Work Management software, today announced financial and operating results for the third quarter of 2017 and provided increased guidance for its fourth quarter and full year of 2017.

Third Quarter 2017 Financial Highlights

  • Total revenue was $26.1 million, an increase of 36% from $19.2 million in the third quarter of 2016.
  • Subscription and support revenue was $23.2 million, an increase of 36% from $17.0 million in the third quarter of 2016.
  • GAAP net loss was $3.5 million compared to a net loss of $2.4 million in the third quarter of 2016, principally as a result of one-time expenses related to the accretive acquisition of Waterfall in the current quarter that were not present in the third quarter of 2016 and a $0.7 million non-cash charge for the write-down of an unnecessary office lease from a recent acquisition.
  • Adjusted EBITDA was $8.3 million, an increase of 133% from $3.6 million in the third quarter of 2016. A reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, is provided in the financial tables that accompany this release.
  • Cash on hand as of the end of the third quarter was $53.0 million.

"Q3 was another outstanding quarter with record 36% revenue growth, record Adjusted EBITDA, and the strategic and accretive acquisition of Waterfall," said Jack McDonald, chairman and chief executive officer of Upland Software. "We have now met or beat guidance in each of the 13 consecutive quarters since going public," he added. "Moreover, we are raising our guidance resulting in Q4 revenue growth of 35% and Adjusted EBITDA margins of 35% at the midpoints, continuing our strong momentum. Our pipeline of accretive acquisitions remains robust, and we have the operating and financial resources to execute."

Third Quarter Business Highlights

  • Expanded 173 existing customer relationships, including 23 major expansions, and added 94 new customer relationships, including 14 major accounts.
  • Delivered the first major release of our Upland RightAnswers Enterprise Knowledge Management solution to improve overall agent and self-service experience; improved the product foundation; and implemented the first phase of Upland's consistent, intuitive UI/UX.
  • Delivered a new cloud cost and usage management module, integrated with Amazon Web Services, for our ComSci ITFM offering.
  • Released seven customer-driven feature packs and product foundation enhancements that included updates to the mobile app in our web content management platform; multipart-SMS reporting improvements, new legislator and geocoding data, and performance improvements in our Upland Mobile Messaging platform; and performance and security enhancements for our Workflow Automation product family.
  • Continued to transition from a colocation data center strategy to Amazon Web Services to create a scalable, standard cloud environment in anticipation of ongoing customer growth.

Business Outlook

Upland provides quarterly and annual revenue guidance, updated, as appropriate, at each quarterly reporting period. For the fourth quarter of 2017, Upland expects reported total revenue to be between $25.6 and $26.6 million, including subscription and support revenue between $23.0 and $23.8 million, for growth in recurring revenue of 37% at the mid-point over the fourth quarter ended December 31, 2016. Adjusted EBITDA is expected to be between $8.8 and $9.4 million, for an Adjusted EBITDA margin of 35% at the mid-point, representing growth of 114% at the mid-point over the quarter-ended December 31, 2016.

Upland raises its 2017 annual revenue guidance range and expects a total reported revenue to be between $95.8 and $96.8 million, including subscription and support revenue between $83.7 and $84.5 million, for growth in recurring revenue of 28% at the mid-point over the year ended December 31, 2016. Adjusted EBITDA is expected to be between $29.4 and $30.0 million, for an Adjusted EBITDA margin of 31% at the mid-point, representing growth of 135% at the mid-point over the year ended December 31, 2016.

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 conference call may be accessed within North America by dialing 1.888.684.7501 and outside of North America by dialing 1.925.418.7884, referencing conference code 72803764. The conference call will be simultaneously webcast on Upland's investor relations website, which can be accessed at investor.uplandsoftware.com. This webcast will contain forward-looking statements and other material information regarding Upland's financial and operating results.

Following completion of the live call, a recorded replay of the webcast will be available on Upland's website at investor.uplandsoftware.com for three months.

About Upland Software

Upland Software (Nasdaq: UPLD) is a leading provider of cloud-based Enterprise Work Management software. Our family of applications enables users to manage their projects, professional workforce and IT investments; automate document-intensive business processes; and effectively engage with their customers, prospects and community via the web and mobile technologies. With more than 2,500 customers and over 250,000 users around the world, Upland Software solutions help customers run their operations smoothly, adapt to change quickly, and achieve better results every day. 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) and non-GAAP net income (loss) per share.

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.

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, loss on debt extinguishment, 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, nonrecurring litigation expenses, purchase accounting adjustments for deferred revenue, and the related tax effect of the adjustments above.

Annualized recurring revenue value as of December 31 equals the monthly value of our recurring revenue contracts measured as of December 31 multiplied by 12. We define annual dollar renewal rate (also referred to as net dollar retention rate) as of December 31 as the aggregate annualized recurring revenue value at December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate annualized recurring revenue value from all customers as of December 31 of the prior fiscal year.

Upland's earnings press releases containing such non-GAAP reconciliations can be found on the Investor Relations section of Upland's website at investor.uplandsoftware.com.

Forward-looking Statements

This release contains forward-looking statements which are subject to substantial risks, uncertainties and assumptions. 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" or similar expressions. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: our financial performance and our ability to achieve, sustain or increase profitability or predict financial results; our ability to attract and retain customers; our ability to deliver high-quality customer service; lack of demand growth for enterprise work management applications; our ability to effectively manage our growth; our ability to consummate and integrate acquisitions and mergers; 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; fluctuations in currency exchange rates; the operation and reliability of our third-party data centers and other service providers; 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 and our recent Quarterly Report on Form 10-Q 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. 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.

Investor Relations Contact: 
Mike Hill 
Upland Software 
512.960.1031 
investor-relations@uplandsoftware.com

Media Contact: 
Kaley Ganino 
Upland Software 
855-944-7526 
media@uplandsoftware.com

 

Upland Software, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016

Revenue:








Subscription and support

$

23,169



$

17,029



$

60,711



$

48,490


Perpetual license

856



332



3,296



1,108


  Total product revenue

24,025



17,361



64,007



49,598


Professional services

2,047



1,880



6,098



5,795


  Total revenue

26,072



19,241



70,105



55,393


Cost of revenue:








Subscription and support

7,737



5,747



20,306



16,607


Professional services

1,376



1,045



3,838



3,775


  Total cost of revenue

9,113



6,792



24,144



20,382


Gross profit

16,959



12,449



45,961



35,011


Operating expenses:








Sales and marketing

4,258



3,097



11,516



9,119


Research and development

4,092



3,737



11,572



11,701


Refundable Canadian tax credits

(195)



(115)



(424)



(340)


General and administrative

5,084



4,670



17,564



13,340


Depreciation and amortization

1,648



1,322



4,111



4,270


Acquisition-related expenses

4,399



1,047



10,368



4,855


  Total operating expenses

19,286



13,758



54,707



42,945


Loss from operations

(2,327)



(1,309)



(8,746)



(7,934)


Other expense:








Interest expense, net

(2,277)



(709)



(4,372)



(1,932)


Loss on debt extinguishment

1,634








Other expense, net

(130)



(64)



(260)



(1,105)


  Total other expense

(773)



(773)



(4,632)



(3,037)


Loss before provision for income taxes

(3,100)



(2,082)



(13,378)



(10,971)


Provision for income taxes

(406)



(308)



(1,553)



(569)


Net loss

$

(3,506)



$

(2,390)



$

(14,931)



$

(11,540)


Net loss per common share:








Net loss per common share, basic and diluted

$

(0.18)



$

(0.14)



$

(0.83)



$

(0.71)


Weighted-average common shares outstanding, basic and diluted

19,380,519



16,702,062



18,043,365



16,339,983


 

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)




September 30, 2017


December 31, 2016



(unaudited)


(audited)

Assets





Current assets:





Cash and cash equivalents


$

52,976



$

28,758


Accounts receivable, net of allowance


19,129



15,254


Prepaid and other


2,970



3,287


  Total current assets


75,075



47,299


Canadian tax credits receivable


1,715



978


Property and equipment, net


3,462



4,356


Intangible assets, net


47,512



28,512


Goodwill


122,904



69,097


Other assets


179



346


Total assets


$

250,847



$

150,588


Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

3,976



$

1,268


Accrued compensation


3,869



2,541


Accrued expenses and other


8,897



5,505


Deferred revenue


31,842



23,552


Due to sellers


8,305



4,642


Current maturities of notes payable


1,701



2,190


  Total current liabilities


58,590



39,698


Commitments and contingencies





Canadian tax credit liability to sellers




361


Notes payable, less current maturities


90,006



45,739


Deferred revenue


1,299



247


Noncurrent deferred tax liability, net


4,239



3,404


Other long-term liabilities


1,366



2,126


Total liabilities


155,500



91,575


Stockholders' equity:





Common stock


2



2


Additional paid-in capital


174,990



124,566


Accumulated other comprehensive loss


(2,311)



(3,152)


Accumulated deficit


(77,334)



(62,403)


Total stockholders' equity


95,347



59,013


Total liabilities and stockholders' equity


$

250,847



$

150,588


 

 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)




Nine Months Ended September 30,



2017


2016

Operating activities





Net loss


$

(14,931)



$

(11,540)


Adjustments to reconcile net loss to net cash provided by operating activities:





Depreciation and amortization


8,112



7,499


Deferred income taxes


698



251


Foreign currency re-measurement (gain) loss


(422)



(222)


Non-cash interest and other expense


416



196


Non-cash stock compensation expense


7,804



2,664


Loss on disposal of business




686


Non-cash loss on retirement of fixed assets


(18)




Changes in operating assets and liabilities, net of purchase business combinations:





  Accounts receivable


753



310


  Prepaids and other


1,664



820


  Accounts payable


1,736



(126)


  Accrued expenses and other liabilities


789



(828)


  Deferred revenue


(793)



1,425


Net cash provided by operating activities


5,808



1,135


Investing activities





Purchase of property and equipment


(443)



(886)


Purchase of customer relationships


(55)



(408)


Purchase business combinations, net of cash acquired


(61,108)



(11,846)


Net cash used in investing activities


(61,606)



(13,140)


Financing activities





Payments on capital leases


(1,098)



(1,320)


Proceeds from notes payable, net of issuance costs


54,683



14,925


Payments on notes payable


(11,319)



(1,560)


Issuance of common stock, net of issuance costs


42,629



197


Additional consideration paid to sellers of businesses


(5,361)



(1,484)


Net cash provided by financing activities


79,534



10,758


Effect of exchange rate fluctuations on cash


482



254


Change in cash and cash equivalents


24,218



(993)


Cash and cash equivalents, beginning of period


28,758



18,473


Cash and cash equivalents, end of period


$

52,976



$

17,480


Supplemental disclosures of cash flow information:





Cash paid for interest


$

3,966



$

1,707


Cash paid for taxes


$

1,463



$

518


Noncash investing and financing activities:





Equipment acquired pursuant to capital lease obligations


$

121



$

802


Issuance of common stock in business combination


$



$

8,100


 

 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands)

(unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016

Reconciliation of Net loss to Adjusted EBITDA:








Net Loss

$

(3,506)



$

(2,390)



$

(14,931)



$

(11,540)


Add:








Depreciation and amortization expense

3,066



2,424



8,112



7,499


Interest expense, net

2,277



709



4,372



1,932


Other expense, net

130



64



260



1,105


Loss on debt extinguishment

(1,634)








Provision for income taxes

406



308



1,553



569


Stock-based compensation expense

1,884



1,100



7,804



2,664


Acquisition-related expense

4,399



1,047



10,368



4,855


Nonrecurring litigation expense







25


Purchase accounting deferred revenue discount

1,294



313



3,032



1,245


Adjusted EBITDA

$

8,316



$

3,575



$

20,570



$

8,354


 

 

Upland Software, Inc.

Reconciliation of Non-GAAP Net Income (Loss) and Non-GAAP Diluted EPS

(in thousands, except share and per share data)

(unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016

Reconciliation of Net Loss to Non-GAAP net income
(loss):








Net loss

$

(3,506)



$

(2,390)



$

(14,931)



$

(11,540)


Add:








Stock-based compensation expense

1,884



1,100



7,804



2,664


Amortization of purchased intangibles

2,493



1,781



6,285



5,629


Amortization of debt discount

296



67



416



196


Acquisition-related expense

4,399



1,047



10,368



4,855


Loss on debt extinguishment

(1,634)








Nonrecurring litigation expense







25


Purchase accounting deferred revenue discount

1,294



313



3,032



1,245


Tax effect of adjustments above

(84)



(81)



(242)



(240)


Non-GAAP net income (loss)

$

5,142



$

1,837



$

12,732



$

2,834










Weighted average ordinary shares outstanding, basic

19,380,519



16,702,062



18,043,365



16,339,983


Weighted average ordinary shares outstanding, diluted

20,633,820



17,250,700



19,169,180



16,721,515


Non-GAAP earnings per share, basic

$

0.27



$

0.11



$

0.71



$

0.17


Non-GAAP earnings per share, diluted

$

0.25



$

0.11



$

0.66



$

0.17


 

 

Upland Software, Inc.

Supplemental Financial Information

(in thousands)

(unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016

Stock-based compensation:








Cost of revenue

$

147



$

13



$

277



$

28


Research and development

219



38



560



80


Sales and marketing

73



21



149



66


General and administrative

1,445



1,028



6,818



2,490


   Total

$

1,884



$

1,100



$

7,804



$

2,664


 

 


Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016

Depreciation:








Cost of revenue

$

443



$

472



$

1,461



$

1,383


Operating expense

130



171



366



487


   Total

$

573



$

643



$

1,827



$

1,870










Amortization:








Cost of revenue

$

975



$

630



$

2,540



$

1,846


Operating expense

1,518



1,151



3,745



3,783


   Total

$

2,493



$

1,781



$

6,285



$

5,629


 

Upland Software, Inc. (PRNewsfoto/Upland Software, Inc.)

 

 

SOURCE Upland Software, Inc.