Upland Software Reports Second Quarter 2019 Financial Results

August 7, 2019 4:01 PM EDT

Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based enterprise work management software, today announced financial and operating results for the second quarter of 2019 and provided guidance for its third quarter and full year of 2019.

Second Quarter 2019 Financial Highlights

  • Total revenue was $53.0 million, an increase of 47% from $35.9 million in the second quarter of 2018.
  • Subscription and support revenue was $48.7 million, an increase of 47% from $33.2 million in the second quarter of 2018.
  • GAAP net loss was $5.4 million, or a loss of $0.24 cents per share, compared to a GAAP net loss of $5.2 million, or a loss of $0.26 cents per share, in the second quarter of 2018.
  • Adjusted EBITDA was $19.1 million, or 36% of total revenue, an increase of 52% from $12.5 million, or 35% of total revenue, in the second quarter of 2018.
  • Cash on hand as of the end of the second quarter was $108.4 million.
  • Completed successful follow-on equity offering raising $159.4 million ($151.1 million, net).
  • Successfully marketed $410 million of combined upgraded credit facilities which subsequently closed on August 6, 2019.

“Q2 was a major milestone quarter: we beat the top of our guidance ranges on both revenue and Adjusted EBITDA, exceeded $200 million annualized revenue run rate for the first time, closed two accretive and strategic acquisitions, released a host of product enhancements, and saw strong sales bookings,” said Jack McDonald, chairman and CEO of Upland Software. “Moreover, we strengthened our acquisition war chest with a successful $159.4 million public equity offering and, just this week, closed a successful $410 million credit financing,” he added. “Our acquisition pipeline is robust, our war chest has been reloaded, our ability to successfully integrate acquired products has never been stronger, and, as our raised guidance reflects, we look forward to a strong second half of 2019.”

Second Quarter Business Highlights

  • Expanded 243 existing customer relationships, including 48 major expansions, and added 150 new customer relationships, including 38 major accounts.
  • Delivered major releases for our Knowledge Management, Enterprise Sales Enablement, and Document Lifecycle Automation solution suites along with 20 feature packs across our product portfolio, enhancing usability, functionality, and performance for our customers.
  • Further improved our integration execution, by migrating to our robust Project and Portfolio Management tool, Upland PowerSteering, from a spreadsheet-based approach, enabling our integration teams to enjoy improved collaboration, visibility, and reporting.
  • Announced the acquisitions of PostUp, which adds sophisticated email and audience development solutions targeting the media and publishing verticals to our Customer Experience Management Solution Suite; as well as Kapost, which adds a cloud-based content operations platform with built-in artificial intelligence, advanced analytics, and a robust set of APIs to our Upland Enterprise Sales Enablement solution suite.
  • Introduced Rant & Rave, a leading provider of cloud-based customer engagement solutions in the UK, to customers in the US, and introduced Upland Mobile Messaging to customers in the UK.

Business Outlook

For the quarter ending September 30, 2019, Upland expects reported total revenue to be between $53.5 and $55.5 million, including subscription and support revenue between $49.8 and $51.4 million, for growth in recurring revenue of 49% at the mid-point over the quarter-ended September 30, 2018. Third quarter 2019 Adjusted EBITDA is expected to be between $19.8 and $20.8 million, for an Adjusted EBITDA margin of roughly 37% at the mid-point, representing growth of 55% at the mid-point over the quarter-ended September 30, 2018.

For the full year ending December 31, 2019, Upland expects reported total revenue to be between $209.9 and $213.9 million, including subscription and support revenue between $195.4 and $198.6 million, for growth in recurring revenue of 44% at the mid-point over the year ended December 31, 2018. Full year 2019 Adjusted EBITDA is expected to be between $77.2 and $79.2 million, for an Adjusted EBITDA margin of 37% at the mid-point, representing growth of 47% at the mid-point over the year ended December 31, 2018.

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 1378273. 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 twelve months.

About Upland Software

Upland Software (Nasdaq: UPLD) is a leader in cloud-based enterprise work management software. Upland provides seven enterprise cloud solution suites that enable more than one million users at over 9,000 accounts to win and engage customers, automate business operations, manage projects and IT costs, and share knowledge throughout the enterprise. All of Upland’s solutions are backed by a 100 percent customer success commitment and the UplandOne platform, which puts customers at the center of everything we do. 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.

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 annual net dollar retention rate (NDRR) 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.

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 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, 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, unaudited, except per share data)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

Subscription and support

 

$

48,715

 

 

$

33,154

 

 

$

93,698

 

 

$

60,883

 

Perpetual license

 

575

 

 

683

 

 

1,232

 

 

2,309

 

Total product revenue

 

49,290

 

 

33,837

 

 

94,930

 

 

63,192

 

Professional services

 

3,723

 

 

2,109

 

 

6,576

 

 

4,369

 

Total revenue

 

53,013

 

 

35,946

 

 

101,506

 

 

67,561

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription and support

 

14,622

 

 

9,580

 

 

27,896

 

 

18,829

 

Professional services

 

1,961

 

 

1,269

 

 

3,475

 

 

2,665

 

Total cost of revenue

 

16,583

 

 

10,849

 

 

31,371

 

 

21,494

 

Gross profit

 

36,430

 

 

25,097

 

 

70,135

 

 

46,067

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

7,989

 

 

5,248

 

 

14,971

 

 

9,656

 

Research and development

 

7,008

 

 

5,286

 

 

13,406

 

 

10,177

 

Refundable Canadian tax credits

 

(85

)

 

(203

)

 

(171

)

 

(305

)

General and administrative

 

12,042

 

 

8,464

 

 

22,036

 

 

15,464

 

Depreciation and amortization

 

5,744

 

 

3,853

 

 

11,003

 

 

5,983

 

Acquisition-related expenses

 

9,264

 

 

3,140

 

 

16,987

 

 

6,242

 

Total operating expenses

 

41,962

 

 

25,788

 

 

78,232

 

 

47,217

 

Loss from operations

 

(5,532

)

 

(691

)

 

(8,097

)

 

(1,150

)

Other expense:

 

 

 

 

 

 

 

 

Interest expense, net

 

(5,246

)

 

(3,143

)

 

(10,362

)

 

(5,637

)

Other income (expense), net

 

(692

)

 

(524

)

 

(1,453

)

 

(221

)

Total other expense

 

(5,938

)

 

(3,667

)

 

(11,815

)

 

(5,858

)

Loss before provision for income taxes

 

(11,470

)

 

(4,358

)

 

(19,912

)

 

(7,008

)

Benefit from (provision for) income taxes

 

6,101

 

 

(872

)

 

6,713

 

 

(1,383

)

Net loss

 

$

(5,369

)

 

$

(5,230

)

 

$

(13,199

)

 

$

(8,391

)

Net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.24

)

 

$

(0.26

)

 

$

(0.61

)

 

$

(0.42

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

22,619,805

 

 

19,901,599

 

 

21,531,216

 

 

19,830,401

 

 
 
 

Upland Software, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)

 

 

 

June 30,

 

December 31,

 

 

2019

 

2018

 

 

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

108,361

 

 

$

16,738

 

Accounts receivable, net of allowance

 

36,758

 

 

40,841

 

Deferred commissions, current

 

3,280

 

 

2,633

 

Unbilled receivables

 

3,995

 

 

3,694

 

Prepaid and other

 

4,620

 

 

3,382

 

Total current assets

 

157,014

 

 

67,288

 

Canadian tax credits receivable

 

1,857

 

 

1,573

 

Property and equipment, net

 

3,568

 

 

2,827

 

Operating lease right-of-use asset

 

6,325

 

 

 

Intangible assets, net

 

207,232

 

 

179,572

 

Goodwill

 

273,363

 

 

225,322

 

Deferred commissions, noncurrent

 

7,957

 

 

6,292

 

Other assets

 

264

 

 

324

 

Total assets

 

$

657,580

 

 

$

483,198

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

3,555

 

 

$

3,494

 

Accrued compensation

 

5,840

 

 

6,581

 

Accrued expenses and other current liabilities

 

17,863

 

 

16,666

 

Deferred revenue

 

59,568

 

 

57,626

 

Due to sellers

 

18,032

 

 

17,267

 

Operating lease liabilities, current

 

2,614

 

 

 

Current maturities of notes payable

 

 

 

6,015

 

Total current liabilities

 

107,472

 

 

107,649

 

Notes payable, less current maturities

 

305,335

 

 

273,713

 

Deferred revenue, noncurrent

 

246

 

 

578

 

Operating lease liabilities, noncurrent

 

4,097

 

 

 

Noncurrent deferred tax liability, net

 

6,773

 

 

13,311

 

Other long-term liabilities

 

685

 

 

640

 

Total liabilities

 

424,608

 

 

395,891

 

Stockholders’ equity:

 

 

 

 

Common stock

 

3

 

 

2

 

Additional paid-in capital

 

338,732

 

 

180,481

 

Accumulated other comprehensive loss

 

(6,889

)

 

(7,501

)

Accumulated deficit

 

(98,874

)

 

(85,675

)

Total stockholders’ equity

 

232,972

 

 

87,307

 

Total liabilities and stockholders’ equity

 

$

657,580

 

 

$

483,198

 

 
 
 
 

Upland Software, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

 

 

 

Six Months Ended June 30,

 

 

2019

 

2018

 

 

 

 

 

Operating activities

 

 

 

 

Net loss

 

$

(13,199

)

 

$

(8,391

)

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

 

 

 

 

Depreciation and amortization

 

15,152

 

 

9,217

 

Deferred income taxes

 

(12,024

)

 

275

 

Amortization of deferred commissions

 

1,735

 

 

1,115

 

Foreign currency re-measurement (gain) loss

 

(212

)

 

269

 

Non-cash interest and other expense

 

565

 

 

404

 

Non-cash stock compensation expense

 

11,529

 

 

6,599

 

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

 

 

 

 

Accounts receivable

 

8,410

 

 

2,963

 

Prepaids and other

 

2,415

 

 

(2,545

)

Accounts payable

 

(483

)

 

(476

)

Accrued expenses and other liabilities

 

(5,756

)

 

(3,898

)

Deferred revenue

 

(2,736

)

 

(1,792

)

Net cash provided by (used in) operating activities

 

5,396

 

 

3,740

 

Investing activities

 

 

 

 

Purchase of property and equipment

 

(364

)

 

(515

)

Purchase business combinations, net of cash acquired

 

(82,824

)

 

(45,362

)

Net cash used in investing activities

 

(83,188

)

 

(45,877

)

Financing activities

 

 

 

 

Payments on capital leases

 

(357

)

 

(505

)

Proceeds from notes payable, net of issuance costs

 

39,339

 

 

49,375

 

Payments on notes payable

 

(13,749

)

 

(1,876

)

Taxes paid related to net share settlement of equity awards

 

(4,811

)

 

(3,862

)

Issuance of common stock, net of issuance costs

 

151,535

 

 

382

 

Additional consideration paid to sellers of businesses

 

(3,340

)

 

(4,294

)

Net cash provided by (used in) financing activities

 

168,617

 

 

39,220

 

Effect of exchange rate fluctuations on cash

 

798

 

 

(372

)

Change in cash and cash equivalents

 

91,623

 

 

(3,289

)

Cash and cash equivalents, beginning of period

 

16,738

 

 

22,326

 

Cash and cash equivalents, end of period

 

$

108,361

 

 

$

19,037

 

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for interest

 

$

10,298

 

 

$

5,260

 

Cash paid for taxes

 

$

1,691

 

 

$

1,856

 

Noncash investing and financing activities:

 

 

 

 

Business combination consideration including holdbacks and earnouts

 

$

5,175

 

 

$

6,781

 

Equipment acquired pursuant to capital lease obligations

 

$

44

 

 

$

 

 
 
 
 

Upland Software, Inc.
Reconciliation of Adjusted EBITDA
(in thousands, unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Reconciliation of net income (loss) to Adjusted EBITDA:

 

 

 

 

 

 

 

 

Net loss

 

$

(5,369

)

 

$

(5,230

)

 

$

(13,199

)

 

$

(8,391

)

Add:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

7,765

 

 

5,045

 

 

15,152

 

 

9,217

 

Interest expense, net

 

5,246

 

 

3,143

 

 

10,362

 

 

5,637

 

Other expense (income), net

 

692

 

 

524

 

 

1,453

 

 

221

 

Provision for income taxes

 

(6,101

)

 

872

 

 

(6,713

)

 

1,383

 

Stock-based compensation expense

 

6,901

 

 

4,022

 

 

11,529

 

 

6,599

 

Acquisition-related expense

 

9,264

 

 

3,140

 

 

16,987

 

 

6,242

 

Purchase accounting deferred revenue discount

 

685

 

 

1,029

 

 

1,282

 

 

2,418

 

Adjusted EBITDA

 

$

19,083

 

 

$

12,545

 

 

$

36,853

 

 

$

23,326

 

 
 
 

Upland Software, Inc.
Reconciliation of Non-GAAP Net Income and Non-GAAP EPS
(in thousands, except share and per share data, unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Reconciliation of net income (loss) to non-GAAP net income:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(5,369

)

 

$

(5,230

)

 

$

(13,199

)

 

$

(8,391

)

Add:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

6,901

 

 

4,022

 

 

11,529

 

 

6,599

 

Amortization of purchased intangibles

 

7,204

 

 

4,485

 

 

14,041

 

 

8,101

 

Amortization of debt discount

 

282

 

 

214

 

 

565

 

 

404

 

Acquisition-related expense

 

9,264

 

 

3,140

 

 

16,987

 

 

6,242

 

Purchase accounting deferred revenue discount

 

685

 

 

1,029

 

 

1,282

 

 

2,418

 

Provision for Income Tax - nonrecurring

 

 

 

 

 

 

 

 

Tax effect of adjustments above

 

(1,037

)

 

(185

)

 

(2,728

)

 

(263

)

Non-GAAP net income

 

$

17,930

 

 

$

7,475

 

 

$

28,477

 

 

$

15,110

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding, basic

 

22,619,805

 

 

19,901,599

 

 

21,531,216

 

 

19,830,401

 

Weighted average ordinary shares outstanding, diluted

 

23,622,830

 

 

20,983,208

 

 

22,360,713

 

 

20,831,769

 

Non-GAAP earnings per share, basic

 

$

0.79

 

 

$

0.38

 

 

$

1.32

 

 

$

0.77

 

Non-GAAP earnings per share, diluted

 

$

0.76

 

 

$

0.36

 

 

$

1.27

 

 

$

0.73

 

 
 
 
 

Upland Software, Inc.
Supplemental Financial Information
(in thousands, unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Stock-based compensation:

 

 

 

 

 

 

 

 

Cost of revenue

 

$

353

 

 

$

190

 

 

$

513

 

 

$

268

 

Research and development

 

632

 

 

375

 

 

953

 

 

488

 

Sales and marketing

 

365

 

 

154

 

 

504

 

 

199

 

General and administrative

 

5,551

 

 

3,303

 

 

9,559

 

 

5,644

 

Total

 

$

6,901

 

 

$

4,022

 

 

$

11,529

 

 

$

6,599

 

 
 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Depreciation:

 

 

 

 

 

 

 

 

Cost of revenue

 

$

238

 

 

$

427

 

 

$

519

 

 

$

863

 

Operating expense

 

323

 

 

133

 

 

592

 

 

253

 

Total

 

$

561

 

 

$

560

 

 

$

1,111

 

 

$

1,116

 

 

 

 

 

 

 

 

 

 

Amortization:

 

 

 

 

 

 

 

 

Cost of revenue

 

$

1,783

 

 

$

765

 

 

$

3,630

 

 

$

2,370

 

Operating expense

 

5,421

 

 

3,720

 

 

10,411

 

 

5,731

 

Total

 

$

7,204

 

 

$

4,485

 

 

$

14,041

 

 

$

8,101

 

 

 

Contacts

Investor Relations Contact:
Mike Hill
Upland Software
512-960-1031
investor-relations@uplandsoftware.com

Media Contact:
Christina Turner
Media@uplandsoftware.com
833-875-2631