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Upland Software Reports Third Quarter 2020 Financial Results

11/05/2020

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 2020 and raised guidance for its fourth quarter and full year of 2020.

Third Quarter 2020 Financial Highlights

  • Total revenue was $74.2 million, an increase of 35% from $55.1 million in the third quarter of 2019.
  • Subscription and support revenue was $71.0 million, an increase of 39% from $51.1 million in the third quarter of 2019.
  • GAAP net loss was $11.3 million, or a loss of $0.42 cents per share, compared to a GAAP net loss of $12.3 million, or a loss of $0.50 cents per share, in the third quarter of 2019.
  • Adjusted EBITDA was $25.0 million, or 34% of total revenue, an increase of 21% from $20.7 million, or 38% of total revenue, in the third quarter of 2019.
  • GAAP operating cash flow was $18.7 million, an increase from negative $0.3 million of GAAP operating cash flow in the third quarter of 2019. Free cash flow was $18.5 million, an increase from negative $0.7 million of free cash flow in the third quarter of 2019.
  • Completed follow-on equity offering raising $136.9 million ($130.1 million, net).
  • Cash on hand as of the end of the third quarter of 2020 was $233.0 million.

"In Q3, we posted record organic growth and free cash flow,” said Jack McDonald, Upland’s chairman and chief executive officer. “We also completed a transformational equity raise - and are now capitalized well enough to be able to grow double digits through a combination of organic growth and acquisitions and are no longer dependent on the equity capital markets due to our free cash flow generation,” he said. “In particular, our goal in 2021 is to achieve our acquisition targets while also generating substantial free cash flow,” he added. “Finally, based on strength we are seeing in our business, we have raised our revenue and Adjusted EBITDA guidance for Q4 and the full year."

Third Quarter Business Highlights

  • Expanded 247 existing customer relationships, including 37 major expansions, and added 108 new customer relationships, including 34 major accounts.
  • Focused on accelerating customer productivity, with six major releases and 15 feature packs across Upland's cloud solutions. For example: in our Project & IT Management Cloud, we introduced a new resource request workflow to help users streamline resource allocation requests, resulting in greater utilization and profitability; and in our Enterprise Sales & Marketing Cloud, we added key Microsoft integrations that enable users to access their RFP and proposal library directly from within Word and Excel.
  • Announced a new offering that will bring Upland's end-to-end cloud-based workflow solution for document capture, image processing, and data extraction onto HP Workpath. This new offering is intended to meet the urgent market demand to rapidly digitize the document lifecycle process as companies work through the challenges of balancing remote and in-office teams.
  • Continued to invest in our go-to-market initiatives across sales, marketing, and customer success.

Business Outlook

For the quarter ending December 31, 2020, Upland expects reported total revenue to be between $70.0 and $74.0 million, including subscription and support revenue between $67.0 and $70.0 million, for growth in recurring revenue of 16% at the mid-point over the quarter-ended December 31, 2019. Fourth quarter 2020 Adjusted EBITDA is expected to be between $23.2 and $25.2 million, for an Adjusted EBITDA margin of 34% at the mid-point, representing a reduction of 3% at the mid-point over the quarter-ended December 31, 2019.

For the full year ending December 31, 2020, Upland expects reported total revenue to be between $283.5 and $287.5 million, including subscription and support revenue between $269.6 and $272.6 million, for growth in recurring revenue of 33% at the mid-point over the year ended December 31, 2019. Full year 2020 Adjusted EBITDA is expected to be between $96.5 and $98.5 million, for an Adjusted EBITDA margin of 34% at the mid-point, representing growth of 18% at the mid-point over the year ended December 31, 2019.

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 1-866-270-1533 in the United States or +1-412-317-0797 if outside the United States. 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 Software (Nasdaq: UPLD) is a leader in cloud-based tools for digital transformation. The Upland Cloud enables thousands of organizations to engage with customers on key digital channels, optimize sales team performance, manage projects and IT costs, and automate critical document workflows. The Upland Cloud is backed by a 100% 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), 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.

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, except per share data, unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Revenue:

 

 

 

 

 

 

 

Subscription and support

$

70,992

 

 

$

51,059

 

 

$

202,582

 

 

$

144,757

 

Perpetual license

411

 

 

975

 

 

1,263

 

 

2,207

 

Total product revenue

71,403

 

 

52,034

 

 

203,845

 

 

146,964

 

Professional services

2,781

 

 

3,031

 

 

9,686

 

 

9,607

 

Total revenue

74,184

 

 

55,065

 

 

213,531

 

 

156,571

 

Cost of revenue:

 

 

 

 

 

 

 

Subscription and support

23,562

 

 

14,678

 

 

64,701

 

 

42,574

 

Professional services

2,021

 

 

1,995

 

 

6,755

 

 

5,470

 

Total cost of revenue

25,583

 

 

16,673

 

 

71,456

 

 

48,044

 

Gross profit

48,601

 

 

38,392

 

 

142,075

 

 

108,527

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

11,760

 

 

8,709

 

 

34,511

 

 

23,680

 

Research and development

10,400

 

 

7,434

 

 

30,308

 

 

20,840

 

Refundable Canadian tax credits

(433)

 

 

(133)

 

 

(929)

 

 

(304)

 

General and administrative

16,864

 

 

12,196

 

 

51,195

 

 

34,232

 

Depreciation and amortization

9,117

 

 

6,427

 

 

27,425

 

 

17,430

 

Acquisition-related expenses

3,574

 

 

7,457

 

 

24,513

 

 

24,444

 

Total operating expenses

51,282

 

 

42,090

 

 

167,023

 

 

120,322

 

Loss from operations

(2,681)

 

 

(3,698)

 

 

(24,948)

 

 

(11,795)

 

Other expense:

 

 

 

 

 

 

 

Interest expense, net

(8,078)

 

 

(5,517)

 

 

(23,594)

 

 

(15,879)

 

Loss on debt extinguishment

 

 

(2,317)

 

 

 

 

(2,317)

 

Other income (expense), net

598

 

 

(228)

 

 

(819)

 

 

(1,681)

 

Total other expense

(7,480)

 

 

(8,062)

 

 

(24,413)

 

 

(19,877)

 

Loss before benefit from (provision for) income taxes

(10,161)

 

 

(11,760)

 

 

(49,361)

 

 

(31,672)

 

Benefit from (provision for) income taxes

(1,149)

 

 

(547)

 

 

3,811

 

 

6,166

 

Net loss

$

(11,310)

 

 

$

(12,307)

 

 

$

(45,550)

 

 

$

(25,506)

 

Net loss per common share, basic and diluted

$

(0.42)

 

 

$

(0.50)

 

 

$

(1.77)

 

 

$

(1.13)

 

Weighted-average common shares outstanding, basic and diluted

27,220,134

 

 

24,568,483

 

 

25,725,495

 

 

22,550,232

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

September 30,

 

December 31,

 

2020

 

2019

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

232,972

 

 

$

175,024

 

Accounts receivable, net of allowance

41,126

 

 

50,938

 

Deferred commissions, current

4,758

 

 

3,059

 

Unbilled receivables

6,912

 

 

5,111

 

Prepaid and other

8,064

 

 

4,748

 

Total current assets

293,832

 

 

238,880

 

Tax credits receivable

4,175

 

 

4,186

 

Property and equipment, net

3,181

 

 

3,917

 

Operating lease right-of-use asset

10,831

 

 

8,056

 

Intangible assets, net

285,312

 

 

282,727

 

Goodwill

383,336

 

 

346,134

 

Deferred commissions, noncurrent

11,259

 

 

8,763

 

Other assets

2,394

 

 

4,165

 

Total assets

$

994,320

 

 

$

896,828

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

6,469

 

 

$

5,904

 

Accrued compensation

6,912

 

 

11,559

 

Accrued expenses and other current liabilities

13,228

 

 

15,344

 

Deferred revenue

78,503

 

 

76,558

 

Due to sellers

3,494

 

 

14,276

 

Operating lease liabilities, current

3,233

 

 

2,533

 

Current maturities of notes payable

3,185

 

 

3,193

 

Total current liabilities

115,024

 

 

129,367

 

Notes payable, less current maturities

519,339

 

 

521,881

 

Deferred revenue, noncurrent

1,493

 

 

496

 

Operating lease liabilities, noncurrent

9,224

 

 

5,862

 

Noncurrent deferred tax liability, net

27,299

 

 

25,685

 

Interest rate swap liabilities

33,073

 

 

 

Other long-term liabilities

624

 

 

676

 

Total liabilities

706,076

 

 

683,967

 

Stockholders’ equity:

 

 

 

Common stock

3

 

 

3

 

Additional paid-in capital

504,425

 

 

345,127

 

Accumulated other comprehensive loss

(39,480)

 

 

(1,223)

 

Accumulated deficit

(176,704)

 

 

(131,046)

 

Total stockholders’ equity

288,244

 

 

212,861

 

Total liabilities and stockholders’ equity

$

994,320

 

 

$

896,828

 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Operating activities

 

 

 

 

 

 

 

Net loss

$

(11,310)

 

 

$

(12,307)

 

 

$

(45,550)

 

 

$

(25,506)

 

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

 

 

 

 

 

 

 

Depreciation and amortization

11,696

 

 

8,570

 

 

35,091

 

 

23,722

 

Deferred income taxes

1,639

 

 

848

 

 

(3,346)

 

 

(11,176)

 

Amortization of deferred costs

1,252

 

 

820

 

 

3,172

 

 

2,555

 

Foreign currency re-measurement loss

(186)

 

 

367

 

 

311

 

 

155

 

Non-cash interest and other expense

561

 

 

414

 

 

1,669

 

 

979

 

Non-cash stock compensation expense

10,963

 

 

7,187

 

 

31,263

 

 

18,716

 

Non-cash loss on retirement of fixed assets

473

 

 

 

 

473

 

 

 

Non-cash loss on debt extinguishment

 

 

2,317

 

 

 

 

2,317

 

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

 

 

 

 

 

 

 

Accounts receivable

7,952

 

 

(2,005)

 

 

13,140

 

 

6,405

 

Prepaids and other

(3,350)

 

 

(6,695)

 

 

(10,093)

 

 

(4,280)

 

Accounts payable

4,476

 

 

(420)

 

 

(1,782)

 

 

(903)

 

Accrued expenses and other liabilities

(1,688)

 

 

719

 

 

(8,789)

 

 

(5,037)

 

Deferred revenue

(3,822)

 

 

(157)

 

 

(1,407)

 

 

(2,893)

 

Net cash provided by (used in) operating activities

18,656

 

 

(342)

 

 

14,152

 

 

5,054

 

Investing activities

 

 

 

 

 

 

 

Purchase of property and equipment

(137)

 

 

(359)

 

 

(833)

 

 

(723)

 

Purchase of customer relationships

 

 

(438)

 

 

(201)

 

 

(438)

 

Purchase business combinations, net of cash acquired

 

 

(22,947)

 

 

(67,651)

 

 

(105,771)

 

Net cash used in investing activities

(137)

 

 

(23,744)

 

 

(68,685)

 

 

(106,932)

 

Financing activities

 

 

 

 

 

 

 

Payments on finance leases

(3)

 

 

(142)

 

 

(86)

 

 

(499)

 

Proceeds from notes payable, net of issuance costs

(27)

 

 

342,967

 

 

(169)

 

 

382,306

 

Payments on notes payable

(1,350)

 

 

(309,469)

 

 

(4,050)

 

 

(323,218)

 

Taxes paid related to net share settlement of equity awards

 

 

(1,297)

 

 

(2,140)

 

 

(6,108)

 

Issuance of common stock, net of issuance costs

130,133

 

 

14

 

 

130,174

 

 

151,549

 

Additional consideration paid to sellers of businesses

(2,072)

 

 

(2,546)

 

 

(11,652)

 

 

(5,886)

 

Net cash provided by financing activities

126,681

 

 

29,527

 

 

112,077

 

 

198,144

 

Effect of exchange rate fluctuations on cash

(138)

 

 

(496)

 

 

404

 

 

302

 

Change in cash and cash equivalents

145,062

 

 

4,945

 

 

57,948

 

 

96,568

 

Cash and cash equivalents, beginning of period

87,910

 

 

108,361

 

 

175,024

 

 

16,738

 

Cash and cash equivalents, end of period

$

232,972

 

 

$

113,306

 

 

$

232,972

 

 

$

113,306

 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Reconciliation of net loss to Adjusted EBITDA:

 

 

 

 

 

 

 

Net loss

$

(11,310)

 

 

$

(12,307)

 

 

$

(45,550)

 

 

$

(25,506)

 

Add:

 

 

 

 

 

 

 

Depreciation and amortization expense

11,696

 

 

8,570

 

 

35,091

 

 

23,722

 

Interest expense, net

8,078

 

 

5,517

 

 

23,594

 

 

15,879

 

Other expense (income), net

(598)

 

 

228

 

 

819

 

 

1,681

 

Loss on debt extinguishment

 

 

2,317

 

 

 

 

2,317

 

Provision for (benefit from) income taxes

1,149

 

 

547

 

 

(3,811)

 

 

(6,166)

 

Stock-based compensation expense

10,963

 

 

7,187

 

 

31,263

 

 

18,716

 

Acquisition-related expense

3,574

 

 

7,457

 

 

24,513

 

 

24,444

 

Purchase accounting deferred revenue discount

1,408

 

 

1,176

 

 

7,381

 

 

2,458

 

Adjusted EBITDA

$

24,960

 

 

$

20,692

 

 

$

73,300

 

 

$

57,545

 

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 September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Reconciliation of net loss to non-GAAP net income:

 

 

 

 

 

 

 

Net income (loss)

$

(11,310)

 

 

$

(12,307)

 

 

$

(45,550)

 

 

$

(25,506)

 

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

10,963

 

 

7,187

 

 

31,263

 

 

18,716

 

Amortization of purchased intangibles

11,222

 

 

8,012

 

 

33,587

 

 

22,053

 

Amortization of debt discount

561

 

 

414

 

 

1,669

 

 

979

 

Acquisition-related expense

3,574

 

 

7,457

 

 

24,513

 

 

24,444

 

Loss on debt extinguishment

 

 

2,317

 

 

 

 

2,317

 

Purchase accounting deferred revenue discount

1,408

 

 

1,176

 

 

7,381

 

 

2,458

 

Tax effect of adjustments above

(1,275)

 

 

(1,065)

 

 

(4,660)

 

 

(3,804)

 

Non-GAAP net income

$

15,143

 

 

$

13,191

 

 

$

48,203

 

 

$

41,657

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding, basic

27,220,134

 

 

24,568,483

 

 

25,725,495

 

 

22,550,232

 

Weighted average ordinary shares outstanding, diluted

27,751,221

 

 

25,425,335

 

 

26,149,617

 

 

23,383,406

 

Non-GAAP earnings per share, basic

$

0.56

 

 

$

0.54

 

 

$

1.87

 

 

$

1.85

 

Non-GAAP earnings per share, diluted

$

0.55

 

 

$

0.52

 

 

$

1.84

 

 

$

1.78

 

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,

 

2020

 

2019

 

2020

 

2019

Reconciliation of Operating Cash Flow to Free Cash Flow:

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

18,656

 

 

$

(342)

 

 

$

14,152

 

 

$

5,054

 

Less: Purchase of Property and Equipment

(137)

 

 

(359)

 

 

(833)

 

 

(723)

 

Free Cash Flow

$

18,519

 

 

$

(701)

 

 

$

13,319

 

 

$

4,331

 

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Stock-based compensation:

 

 

 

 

 

 

 

Cost of revenue

$

624

 

 

$

250

 

 

$

1,512

 

 

$

763

 

Research and development

1,005

 

 

683

 

 

2,639

 

 

1,637

 

Sales and marketing

968

 

 

508

 

 

2,415

 

 

1,012

 

General and administrative

8,366

 

 

5,746

 

 

24,697

 

 

15,304

 

Total

$

10,963

 

 

$

7,187

 

 

$

31,263

 

 

$

18,716

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Depreciation:

 

 

 

 

 

 

 

Cost of revenue

$

37

 

 

$

197

 

 

$

153

 

 

$

716

 

Operating expense

437

 

 

361

 

 

1,351

 

 

953

 

Total

$

474

 

 

$

558

 

 

$

1,504

 

 

$

1,669

 

 

 

 

 

 

 

 

 

Amortization:

 

 

 

 

 

 

 

Cost of revenue

$

2,542

 

 

$

1,946

 

 

$

7,513

 

 

$

5,576

 

Operating expense

8,680

 

 

6,066

 

 

26,074

 

 

16,477

 

Total

$

11,222

 

 

$

8,012

 

 

$

33,587

 

 

$

22,053

 

 

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

Media Contact:
Kendell Kelton
media@uplandsoftware.com
833-875-2631

Source: Upland Software Inc.

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