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Upland Software Reports Record Quarterly and Full Year 2017 Financial Results with 44% Revenue Growth in Fourth Quarter and Provides Strong First Quarter 2018 Guidance Range with 45% Revenue Growth at the Midpoint

AUSTIN, Texas, March 8, 2018 /PRNewswire/ -- Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based Enterprise Work Management software, today announced financial and operating results for the fourth quarter and full year of 2017 and provided guidance for its first quarter and full year of 2018.

Fourth Quarter 2017 Financial Highlights

  • Total revenue was $27.8 million, an increase of 44% from $19.4 million in the fourth quarter of 2016.
  • Subscription and support revenue was $24.8 million, an increase of 45% from $17.1 million in the fourth quarter of 2016.
  • GAAP net loss was $3.8 million, an increase of 92% from $2.0 million, in the fourth quarter of 2016, principally as a result of one-time expenses related to the accretive acquisition of Qvidian in the fourth quarter that was not present in the fourth quarter of 2016.
  • Adjusted EBITDA was $9.7 million, or 35% of total revenue, an increase of 129% from $4.3 million, or 22% of total revenue, in the fourth 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 fourth quarter was $22.3 million.

Full Year 2017 Financial Highlights

  • Total revenue was $98.0 million, an increase of 31% from $74.8 million in 2016.
  • Subscription and support revenue was $85.5 million, an increase of 30% from $65.6 million in 2016.
  • GAAP net loss was $18.7 million, an increase of 39% compared to a net loss of $13.5 million in 2016.
  • Adjusted EBITDA was $30.3 million, or 31% of total revenue, an increase of 140% from $12.6 million, or 17% of revenue, in 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.

"2017 was an outstanding year on all fronts," said Jack McDonald, chairman and CEO of Upland Software.  "We made four strategic and accretive acquisitions that added $48.5 million in annualized gross revenue run-rate, increased Adjusted EBITDA margins from 22% to 35% year-over-year reaching our exit 2017 goal,  and continued our track record of strong product innovation and customer success," he said. "Our pipeline of acquisitions remains robust, and we have the operating and financial resources to execute on significant revenue growth and margin expansion towards our long-term 40% Adjusted EBITDA target," he added.

Fourth Quarter and Full Year Business Highlights

  • Expanded 227 existing customer relationships, including 21 major expansions, during the fourth quarter for a total of 648 expanded customer relationships, including 68 major expansions, for the full year 2017.
  • Added 151 new customer relationships, including 19 major accounts, during the fourth quarter for a total of 525 new customer relationships, including 52 major accounts, for the full year 2017.
  • Delivered 93% annual net dollar retention rate (NDRR) as of December 31, 2017.
  • Raised our long-term Adjusted EBITDA margin target to 40%.
  • Completed four acquisitions delivering $48.5 million in aggregate annualized gross revenue run-rate.  Each acquisition was accretive to Adjusted EBITDA per share, and included:
    • Expanded our Workflow Automation family by acquiring Qvidian and AccuRoute.  Qvidian is a premier cloud-based RFP and proposal automation software platform serving more than 1,000 companies worldwide, while AccuRoute is one of the industry's most powerful automation and document management platforms.
    • Expanded our Digital Engagement family by acquiring Waterfall, a leading cloud-based mobile marketing solution that allows brands to build their existing customer database and drive top-line revenue with targeted, relevant mobile content.
    • Expanded our Project and IT Management family by acquiring RightAnswers, an award-winning, cloud-based knowledge management system.
  • Completed a $42.7 million, net, follow-on public offering of common stock in June and increased our acquisition credit facility to $200 million in August.
  • Influenced by Customer Advisory Boards, Virtual User Conferences, Executive Outreach meetings, and through Upland communities, launched 15 major product feature releases in 2017 including improvements to integration, content monitoring, user experience, reporting, and administration.
  • Transitioned nine products from co-location data centers to Amazon Web Services, creating a much more scalable, secure, and cost-efficient cloud environment to support our ongoing customer growth. Remaining products will be transitioned in 2018.

Business Outlook

For the quarter ending March 31, 2018, Upland expects reported total revenue to be between $29.6 and $30.6 million, including subscription and support revenue between $26.4 and $27.2 million, for growth in recurring revenue of 48% at the mid-point over the first quarter ended March 31, 2017. First quarter 2018 Adjusted EBITDA is expected to be between $9.9 and $10.5 million, for an Adjusted EBITDA margin of 34% at the mid-point, representing growth of 87% at the mid-point over the quarter-ended March 31, 2017.

For the full year ending December 31, 2018, Upland expects reported total revenue to be between $120.4 and $124.4 million, including subscription and support revenue between $107.8 and $111.0 million, for growth in recurring revenue of 28% at the mid-point over the year ended December 31, 2017. Full year 2018 Adjusted EBITDA is expected to be between $42.0 and $44.0 million, for an Adjusted EBITDA margin of 35% at the mid-point, representing growth of 42% at the mid-point over the year ended December 31, 2017.

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 8190259. 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 six 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 4,000 customers and over 450,000 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, provision for income taxes, stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, and purchase accounting adjustments for deferred revenue.  Prior to the filing of this Annual Report on Form 10-K, we did not include purchase accounting adjustments for deferred revenue as a component of Adjusted EBITDA, and as such, the prior year Adjusted EBITDA amounts presented herein have been recast to reflect the inclusion of 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.

Upland defines annual 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. This measure excludes the revenue value of uncontracted overage fees and on-demand service fees.

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

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:
Christina Turner
Media@uplandsoftware.com
855-944-7526

 

 

Upland Software, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)



Three Months Ended December 31,


Twelve Months Ended December 31,


2017


2016


2017


2016


(unaudited)


(unaudited)



Revenue:








Subscription and support

$

24,756



$

17,062



$

85,467



$

65,552


Perpetual license

1,050



542



4,346



1,650


Total product revenue

25,806



17,604



89,813



67,202


Professional services

2,041



1,770



8,139



7,565


Total revenue

27,847



19,374



97,952



74,767


Cost of revenue:








Subscription and support

8,148



6,127



28,454



22,734


Professional services

1,355



1,056



5,193



4,831


Total cost of revenue

9,503



7,183



33,647



27,565


Gross profit

18,344



12,191



64,305



47,202


Operating expenses:








Sales and marketing

3,791



3,041



15,307



12,160


Research and development

4,223



3,218



15,795



14,919


Refundable Canadian tax credits

(118)



(173)



(542)



(513)


General and administrative

5,727



4,946



23,291



18,286


Depreciation and amortization

2,387



1,021



6,498



5,291


Acquisition-related expenses

4,724



728



15,092



5,583


Total operating expenses

20,734



12,781



75,441



55,726


Loss from operations

(2,390)



(590)



(11,136)



(8,524)


Other expense:








Interest expense, net

(2,210)



(849)



(6,582)



(2,781)


Other expense, net

549



427



289



(678)


Total other expense

(1,661)



(422)



(6,293)



(3,459)


Loss before provision for income taxes

(4,051)



(1,012)



(17,429)



(11,983)


Provision for income taxes

257



(961)



(1,296)



(1,530)


Net loss

$

(3,794)



$

(1,973)



$

(18,725)



$

(13,513)


Net loss per common share:








Net loss per common share, basic and diluted

$

(0.19)



$

(0.12)



$

(1.02)



$

(0.82)


Weighted-average common shares outstanding, basic and 
     diluted

19,514,893



16,871,250



18,411,247



16,472,799


 

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)




December 31,



2017


2016



(unaudited)



Assets





Current assets:





Cash and cash equivalents


$

22,326



$

28,758


Accounts receivable, net of allowance


26,504



15,254


Prepaid and other


2,856



3,287


Total current assets


51,686



47,299


Canadian tax credits receivable


1,196



978


Property and equipment, net


2,927



4,356


Intangible assets, net


70,043



28,512


Goodwill


154,607



69,097


Other assets


800



346


Total assets


$

281,259



$

150,588


Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

3,887



$

1,268


Accrued compensation


5,157



2,541


Accrued expenses and other


12,148



5,505


Deferred revenue


43,807



23,552


Due to sellers


7,839



4,642


Current maturities of notes payable


2,301



2,190


Total current liabilities


75,139



39,698


Commitments and contingencies





Canadian tax credit liability to sellers




361


Notes payable, less current maturities


108,843



45,739


Deferred revenue


1,570



247


Noncurrent deferred tax liability, net


3,262



3,404


Other long-term liabilities


1,030



2,126


Total liabilities


189,844



91,575


Stockholders' equity:





  Preferred stock





Common stock


2



2


Additional paid-in capital


174,944



124,566


Accumulated other comprehensive loss


(2,403)



(3,152)


Accumulated deficit


(81,128)



(62,403)


Total stockholders' equity


91,415



59,013


Total liabilities and stockholders' equity


$

281,259



$

150,588


 

 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)




Twelve Months Ended December 31,



2017


2016



(unaudited)



Operating activities





Net loss


$

(18,725)



$

(13,513)


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





Depreciation and amortization


11,914



9,794


Deferred income taxes


(262)



529


Foreign currency re-measurement (gain) loss


(382)



(64)


Non-cash interest and other expense


592



327


Non-cash stock compensation expense


9,977



4,333


Loss on disposal of business




746


Non-cash loss on retirement of fixed assets


(19)



276


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





Accounts receivable


(4,710)



(361)


Prepaids and other


1,555



648


Accounts payable


1,254



(1,453)


Accrued expenses and other liabilities


3,715



413


Deferred revenue


2,807



2,200


Net cash provided by (used in) operating activities


7,716



3,875


Investing activities





Purchase of property and equipment


(396)



(670)


Purchase of customer relationships


(55)



(408)


Purchase business combinations, net of cash acquired


(110,324)



(12,151)


Net cash used in investing activities


(110,775)



(13,229)


Financing activities





Payments on capital leases


(1,497)



(1,683)


Proceeds from notes payable, net of issuance costs


74,538



30,992


Payments on notes payable


(11,912)



(7,190)


Taxes paid related to net share settlement of equity awards


(3,387)



(726)


Issuance of common stock, net of issuance costs


43,797



211


Additional consideration paid to sellers of businesses


(5,361)



(2,079)


Net cash provided by (used in) financing activities


96,178



19,525


Effect of exchange rate fluctuations on cash


449



114


Change in cash and cash equivalents


(6,432)



10,285


Cash and cash equivalents, beginning of period


28,758



18,473


Cash and cash equivalents, end of period


$

22,326



$

28,758


Supplemental disclosures of cash flow information:





Cash paid for interest


$

6,012



$

2,455


Cash paid for taxes


$

1,782



$

488


Noncash investing and financing activities:





Equipment acquired pursuant to capital lease obligations


$

50



$

1,293


Issuance of common stock in business combination


$



$

8,300


 

 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)



Three Months Ended

December 31,


Twelve Months Ended

December 31,


2017


2016


2017


2016

Reconciliation of Net loss to Adjusted EBITDA:








Net Loss

$

(3,794)



$

(1,973)



$

(18,725)



$

(13,513)


Add:








Depreciation and amortization expense

3,802



2,295



11,914



9,794


Interest expense, net

2,210



849



6,582



2,781


Other expense (income), net

(549)



(427)



(289)



678


Provision for income taxes

(257)



961



1,296



1,530


Stock-based compensation expense

2,173



1,669



9,977



4,333


Acquisition-related expense

4,724



728



15,092



5,583


Non-recurring litigation costs







25


Purchase accounting deferred revenue discount

1,437



160



4,469



1,405


Adjusted EBITDA

$

9,746



$

4,262



$

30,316



$

12,616


 

 

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
December 31,


Twelve Months Ended
December 31,


2017


2016


2017


2016

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








Net loss

$

(3,794)



$

(1,973)



$

(18,725)



$

(13,513)


Add:








Stock-based compensation expense

2,173



1,669



9,977



4,333


Amortization of purchased intangibles

3,013



1,478



9,298



7,107


Amortization of debt discount

176



131



592



327


Acquisition-related expense

4,724



728



15,092



5,583


Nonrecurring litigation expense







25


Purchase accounting deferred revenue discount

1,437



160



4,469



1,405


Tax effect of adjustments above

(82)



(79)



(324)



(319)


Non-GAAP net income (loss)

$

7,647



$

2,114



$

20,379



$

4,948










Weighted average ordinary shares outstanding, basic

19,514,893



16,871,250



18,411,247



16,472,799


Weighted average ordinary shares outstanding, diluted

20,668,840



17,457,565



14,841,316



16,892,549


Non-GAAP earnings per share, basic

$

0.39



$

0.13



$

1.11



$

0.30


Non-GAAP earnings per share, diluted

$

0.37



$

0.12



$

1.37



$

0.29


 

 

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)



Three Months Ended
December 31,


Twelve Months Ended
December 31,


2017


2016


2017


2016

Stock-based compensation:








Cost of revenue

$

159



$

16



$

436



$

44


Research and development

236



124



796



204


Sales and marketing

83



39



232



105


General and administrative

1,695



1,490



8,513



3,980


Total

$

2,173



$

1,669



$

9,977



$

4,333



















Three Months Ended
December 31,


Twelve Months Ended
December 31,


2017


2016


2017


2016

Depreciation:








Cost of revenue

$

442



$

648



$

1,904



$

2,030


Operating expense

347



169



712



657


Total

$

789



$

817



$

2,616



$

2,687










Amortization:








Cost of revenue

$

973



$

626



$

3,512



$

2,473


Operating expense

2,040



852



5,786



4,634


Total

$

3,013



$

1,478



$

9,298



$

7,107


 

 

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

 

SOURCE Upland Software, Inc.