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Upland Software Reports Second Quarter 2021 Financial Results

08/04/2021

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

Second Quarter 2021 Financial Highlights

  • Total revenue was $76.3 million, an increase of 7% from $71.3 million in the second quarter of 2020.
  • Subscription and support revenue was $72.4 million, an increase of 7% from $67.7 million in the second quarter of 2020.
  • GAAP net loss was $19.0 million, or a loss of $0.63 cents per share, compared to a GAAP net loss of $14.2 million, or a loss of $0.57 cents per share, in the second quarter of 2020.
  • Adjusted EBITDA was $23.7 million, or 31% of total revenue, compared to $23.7 million, or 33% of total revenue, in the second quarter of 2020.
  • GAAP operating cash flow was $10.8 million, compared to GAAP operating cash flow of $0.8 million in the second quarter of 2020. Free cash flow was $10.6 million, compared to free cash flow of $0.4 million in the second quarter of 2020.
  • Cash on hand as of the end of the second quarter of 2021 was $176.5 million.

"In Q2, we closed the strategic and accretive acquisition of Panviva,” said Jack McDonald, Upland’s chairman and chief executive officer. “In addition, we posted strong free cash flow, while continuing to invest in our go-to-market growth initiatives,” he added. “Our acquisition pipeline remains robust and we are active in the market for additional opportunities.”

Second Quarter Business Highlights

  • We expanded relationships with 311 existing customers, 51 of which were major expansions. We also welcomed 133 new customers to Upland in the second quarter, including 32 new major customers.
  • We completed the acquisition of Panviva, expanding our presence in the knowledge management market for regulated industries including utilities, healthcare, and financial services.
  • We welcomed Dan Doman as our new Chief Product Officer. Dan is focused on optimizing our product strategy and sharpening our R&D focus, all while working closely with our M&A and go-to-market functions.

Business Outlook

For the quarter ending September 30, 2021, Upland expects reported total revenue to be between $75.4 and $79.4 million, including subscription and support revenue between $72.2 and $75.8 million, for growth in recurring revenue of 4% at the mid-point over the quarter-ended September 30, 2020. Third quarter 2021 Adjusted EBITDA is expected to be between $23.9 and $25.9 million, for an Adjusted EBITDA margin of 32% at the mid-point. This Adjusted EBITDA guide at the mid-point is in line with the quarter-ended September 30, 2020.

For the full year ending December 31, 2021, Upland expects reported total revenue to be between $300.8 and $312.8 million, including subscription and support revenue between $287.1 and $297.1 million, for growth in recurring revenue of 5% at the mid-point over the year ended December 31, 2020. Full year 2021 Adjusted EBITDA is expected to be between $94.8 and $100.8 million, for an Adjusted EBITDA margin of 32% at the mid-point. This Adjusted EBITDA guide at the midpoint is a reduction of 2% over the year ended December 31, 2020, reflecting incremental investments in our go-to-market activities.

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, using the conference identification number: 10158078. This webcast will contain forward-looking statements and other material information regarding Upland’s financial and operating results.

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

About Upland Software

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

Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

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

Forward-looking Statements

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

 

 

Upland Software, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Revenue:

 

 

 

 

 

 

 

Subscription and support

$

72,405

 

 

$

67,699

 

 

$

143,058

 

 

$

131,590

 

Perpetual license

415

 

 

491

 

 

767

 

 

852

 

Total product revenue

72,820

 

 

68,190

 

 

143,825

 

 

132,442

 

Professional services

3,444

 

 

3,125

 

 

6,408

 

 

6,905

 

Total revenue

76,264

 

 

71,315

 

 

150,233

 

 

139,347

 

Cost of revenue:

 

 

 

 

 

 

 

Subscription and support

23,161

 

 

21,200

 

 

45,843

 

 

41,139

 

Professional services and other

1,851

 

 

2,472

 

 

3,596

 

 

4,734

 

Total cost of revenue

25,012

 

 

23,672

 

 

49,439

 

 

45,873

 

Gross profit

51,252

 

 

47,643

 

 

100,794

 

 

93,474

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

14,298

 

 

11,820

 

 

26,730

 

 

22,751

 

Research and development

11,113

 

 

10,294

 

 

22,053

 

 

19,412

 

General and administrative

19,192

 

 

17,655

 

 

43,561

 

 

34,331

 

Depreciation and amortization

10,278

 

 

9,037

 

 

20,021

 

 

18,308

 

Acquisition-related expenses

5,534

 

 

5,781

 

 

15,120

 

 

20,939

 

Total operating expenses

60,415

 

 

54,587

 

 

127,485

 

 

115,741

 

Income (loss) from operations

(9,163

)

 

(6,944

)

 

(26,691

)

 

(22,267

)

Other expense:

 

 

 

 

 

 

 

Interest expense, net

(7,942

)

 

(7,873

)

 

(15,729

)

 

(15,516

)

Other expense, net

(399

)

 

(15

)

 

(162

)

 

(1,417

)

Total other expense

(8,341

)

 

(7,888

)

 

(15,891

)

 

(16,933

)

Loss before benefit from (provision for) income taxes

(17,504

)

 

(14,832

)

 

(42,582

)

 

(39,200

)

Benefit from (provision for) income taxes

(1,538

)

 

673

 

 

2,856

 

 

4,960

 

Net loss

$

(19,042

)

 

$

(14,159

)

 

$

(39,726

)

 

$

(34,240

)

Net loss per common share, basic and diluted

$

(0.63

)

 

$

(0.57

)

 

$

(1.32

)

 

$

(1.37

)

Weighted-average common shares outstanding, basic and diluted

30,097,749

 

 

25,032,996

 

 

30,034,252

 

 

25,057,715

 

 

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

June 30,

 

December 31,

 

2021

 

2020

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

176,539

 

 

$

250,029

 

Accounts receivable, net of allowance

38,936

 

 

44,472

 

Deferred commissions, current

7,878

 

 

5,784

 

Unbilled receivables

5,652

 

 

4,561

 

Prepaid and other

13,579

 

 

12,694

 

Total current assets

242,584

 

 

317,540

 

Tax credits receivable

2,729

 

 

2,427

 

Property and equipment, net

3,161

 

 

2,778

 

Operating lease right-of-use asset

6,740

 

 

10,124

 

Intangible assets, net

304,752

 

 

279,975

 

Goodwill

470,182

 

 

383,598

 

Deferred commissions, noncurrent

14,444

 

 

12,962

 

Other assets

1,807

 

 

1,816

 

Total assets

$

1,046,399

 

 

$

1,011,220

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

15,608

 

 

$

5,395

 

Accrued compensation

15,142

 

 

8,138

 

Accrued expenses and other current liabilities

13,361

 

 

13,438

 

Deferred revenue

95,245

 

 

87,552

 

Due to sellers

11,143

 

 

416

 

Operating lease liabilities, current

3,621

 

 

3,315

 

Current maturities of notes payable

3,153

 

 

3,166

 

Total current liabilities

157,273

 

 

121,420

 

Notes payable, less current maturities

516,751

 

 

518,437

 

Deferred revenue, noncurrent

1,667

 

 

1,587

 

Operating lease liabilities, noncurrent

8,537

 

 

8,387

 

Noncurrent deferred tax liability, net

31,774

 

 

24,092

 

Interest rate swap liabilities

17,754

 

 

30,032

 

Other long-term liabilities

1,206

 

 

650

 

Total liabilities

734,962

 

 

704,605

 

Stockholders’ equity:

 

 

 

Common stock

3

 

 

3

 

Additional paid-in capital

546,771

 

 

515,219

 

Accumulated other comprehensive loss

(13,238

)

 

(26,234

)

Accumulated deficit

(222,099

)

 

(182,373

)

Total stockholders’ equity

311,437

 

 

306,615

 

Total liabilities and stockholders’ equity

$

1,046,399

 

 

$

1,011,220

 

 

 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Operating activities

 

 

 

 

 

 

 

Net loss

$

(19,042

)

 

$

(14,159

)

 

$

(39,726

)

 

$

(34,240

)

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

 

 

 

 

 

 

 

Depreciation and amortization

13,201

 

 

11,658

 

 

25,669

 

 

23,395

 

Change in fair value of liabilities to sellers of businesses

(2,729

)

 

155

 

 

(2,729

)

 

155

 

Deferred income taxes

1,951

 

 

(637

)

 

(3,389

)

 

(4,985

)

Amortization of deferred costs

2,081

 

 

1,026

 

 

3,848

 

 

1,920

 

Foreign currency re-measurement loss

(4

)

 

(90

)

 

10

 

 

497

 

Non-cash interest and other expense

561

 

 

556

 

 

1,115

 

 

1,108

 

Non-cash stock compensation expense

13,550

 

 

10,980

 

 

31,374

 

 

20,300

 

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

 

 

 

 

 

 

 

Accounts receivable

6,599

 

 

6,852

 

 

10,174

 

 

5,188

 

Prepaids and other

(2,616

)

 

(3,965

)

 

(3,631

)

 

(6,743

)

Accounts payable

1,375

 

 

(2,819

)

 

5,915

 

 

(6,258

)

Accrued expenses and other liabilities

(648

)

 

(1,314

)

 

(2,424

)

 

(7,256

)

Deferred revenue

(3,474

)

 

(7,438

)

 

(2,898

)

 

2,415

 

Net cash provided by (used in) operating activities

10,805

 

 

805

 

 

23,308

 

 

(4,504

)

Investing activities

 

 

 

 

 

 

 

Purchase of property and equipment

(225

)

 

(400

)

 

(507

)

 

(696

)

Purchase of customer relationships

 

 

 

 

 

 

(201

)

Purchase business combinations, net of cash acquired

(19,799

)

 

 

 

(92,417

)

 

(67,651

)

Net cash used in investing activities

(20,024

)

 

(400

)

 

(92,924

)

 

(68,548

)

Financing activities

 

 

 

 

 

 

 

Payments on finance leases

 

 

(28

)

 

(4

)

 

(83

)

Proceeds from notes payable, net of issuance costs

(113

)

 

(70

)

 

(113

)

 

(142

)

Payments on notes payable

(1,350

)

 

(1,350

)

 

(2,700

)

 

(2,700

)

Taxes paid related to net share settlement of equity awards

 

 

(1,372

)

 

 

 

(2,140

)

Issuance of common stock, net of issuance costs

177

 

 

 

 

178

 

 

41

 

Additional consideration paid to sellers of businesses

 

 

(8,580

)

 

(742

)

 

(9,580

)

Net cash used in financing activities

(1,286

)

 

(11,400

)

 

(3,381

)

 

(14,604

)

Effect of exchange rate fluctuations on cash

372

 

 

217

 

 

(493

)

 

542

 

Change in cash and cash equivalents

(10,133

)

 

(10,778

)

 

(73,490

)

 

(87,114

)

Cash and cash equivalents, beginning of period

186,672

 

 

98,688

 

 

250,029

 

 

175,024

 

Cash and cash equivalents, end of period

$

176,539

 

 

$

87,910

 

 

$

176,539

 

 

$

87,910

 

 

 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Reconciliation of net loss to Adjusted EBITDA:

 

 

 

 

 

 

 

Net loss

$

(19,042

)

 

$

(14,159

)

 

$

(39,726

)

 

$

(34,240

)

Add:

 

 

 

 

 

 

 

Depreciation and amortization expense

13,201

 

 

11,658

 

 

25,669

 

 

23,395

 

Interest expense, net

7,942

 

 

7,873

 

 

15,729

 

 

15,516

 

Other expense (income), net

399

 

 

15

 

 

162

 

 

1,417

 

Benefit from income taxes

1,538

 

 

(673

)

 

(2,856

)

 

(4,960

)

Stock-based compensation expense

13,550

 

 

10,980

 

 

31,374

 

 

20,300

 

Acquisition-related expense

5,534

 

 

5,781

 

 

15,120

 

 

20,939

 

Purchase accounting deferred revenue discount

606

 

 

2,272

 

 

1,100

 

 

5,973

 

Adjusted EBITDA

$

23,728

 

 

$

23,747

 

 

$

46,572

 

 

$

48,340

 

 

 

 

Upland Software, Inc.

Reconciliation of Non-GAAP Net Loss and Non-GAAP EPS

(in thousands, except share and per share data, unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Reconciliation of net loss to non-GAAP net income:

 

 

 

 

 

 

 

Net loss

$

(19,042

)

 

$

(14,159

)

 

$

(39,726

)

 

$

(34,240

)

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

13,550

 

 

10,980

 

 

31,374

 

 

20,300

 

Amortization of purchased intangibles

12,732

 

 

11,160

 

 

24,745

 

 

22,365

 

Amortization of debt discount

561

 

 

556

 

 

1,115

 

 

1,108

 

Acquisition-related expense

5,534

 

 

5,781

 

 

15,120

 

 

20,939

 

Purchase accounting deferred revenue discount

606

 

 

2,272

 

 

1,100

 

 

5,973

 

Tax effect of adjustments above

(1,361

)

 

(1,440

)

 

(2,675

)

 

(3,308

)

Non-GAAP net income

$

12,580

 

 

$

15,150

 

 

$

31,053

 

 

$

33,137

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding, basic

30,097,749

 

 

25,032,996

 

 

30,034,252

 

 

25,057,715

 

Weighted average ordinary shares outstanding, diluted

30,695,700

 

 

25,419,592

 

 

30,648,957

 

 

25,470,778

 

Non-GAAP earnings per share, basic

$

0.42

 

 

$

0.61

 

 

$

1.03

 

 

$

1.32

 

Non-GAAP earnings per share, diluted

$

0.41

 

 

$

0.60

 

 

$

1.01

 

 

$

1.30

 

 

 

 

Upland Software, Inc.

Reconciliation of Operating Cash Flow to Free Cash Flow

(in thousands, unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Reconciliation of Operating Cash Flow to Free Cash Flow:

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

10,805

 

 

$

805

 

 

$

23,308

 

 

$

(4,504

)

Less: Purchase of Property and Equipment

(225

)

 

(400

)

 

(507

)

 

(696

)

Free Cash Flow

$

10,580

 

 

$

405

 

 

$

22,801

 

 

$

(5,200

)

 

 

 

Upland Software, Inc.

Supplemental Financial Information

(in thousands)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Stock-based compensation:

 

 

 

 

 

 

 

Cost of revenue

$

563

 

 

$

570

 

 

$

1,005

 

 

$

888

 

Research and development

942

 

 

1,019

 

 

1,656

 

 

1,634

 

Sales and marketing

1,619

 

 

898

 

 

2,756

 

 

1,447

 

General and administrative

10,426

 

 

8,493

 

 

25,957

 

 

16,331

 

Total

$

13,550

 

 

$

10,980

 

 

$

31,374

 

 

$

20,300

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Depreciation:

 

 

 

 

 

 

 

Cost of revenue

$

11

 

 

$

45

 

 

$

22

 

 

$

116

 

Operating expense

458

 

 

453

 

 

902

 

 

914

 

Total

$

469

 

 

$

498

 

 

$

924

 

 

$

1,030

 

 

 

 

 

 

 

 

 

Amortization:

 

 

 

 

 

 

 

Cost of revenue

$

2,912

 

 

$

2,576

 

 

$

5,626

 

 

$

4,971

 

Operating expense

9,820

 

 

8,584

 

 

19,119

 

 

17,394

 

Total

$

12,732

 

 

$

11,160

 

 

$

24,745

 

 

$

22,365

 

 

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

Media Contact:
Kendell Kelton
media@uplandsoftware.com
678-575-7428

Source: Upland Software Inc.

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