Upland Software Reports Third Quarter 2019 Financial Results

November 7, 2019 4:01 PM EST

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

Third Quarter 2019 Financial Highlights

  • Total revenue was $55.1 million, an increase of 48% from $37.1 million in the third quarter of 2018.
  • Subscription and support revenue was $51.1 million, an increase of 51% from $33.9 million in the third quarter of 2018.
  • GAAP net loss was $12.3 million, or a loss of $0.50 cents per share, compared to a GAAP net loss of $4.3 million, or a loss of $0.21 cents per share, in the third quarter of 2018.
  • Adjusted EBITDA was $20.7 million, or 38% of total revenue, an increase of 58% from $13.1 million, or 35% of total revenue, in the third quarter of 2018.
  • Cash on hand as of the end of the third quarter was $113.3 million.
  • Closed a $410 million credit agreement to provide additional capital for growth.

“Q3 was a record quarter with strong revenue growth, record Adjusted EBITDA, and a host of innovative product releases,” said Jack McDonald, chairman and CEO of Upland Software. “In addition, since the end of Q2, we have closed three strategic and accretive acquisitions that have taken Upland to a $259 million revenue run-rate and a $99 million Adjusted EBITDA run-rate. Our M&A pipeline is robust, we are actively pursuing additional strategic acquisition opportunities, and as our strong Q4 and full year guidance reflects, we are looking forward to a strong end to the year.”

Third Quarter Business Highlights

  • Since the beginning of Q3, closed three strategic and accretive acquisitions that together added $41 million in total revenue and $18 million in Adjusted EBITDA, including CIMPL, which added telecom expense management to our Project & IT Management cloud; InGenius, which added computer telephony integration to our Contact Center Productivity solution suite; and Altify, which added a robust customer revenue optimization capability, forming the core of our new Sales Optimization solution suite (InGenius and Altify closed just after the end of the third quarter).
  • Expanded 204 existing customer relationships, including 24 major expansions, and added 95 new customer relationships, including 22 major accounts.
  • Delivered 4 major releases and 30 feature packs, including launch of fully-integrated Upland Professional Services Automation solution, integration between our RFP and Workflow Automation solutions, and enhancement of data security compliance capabilities with secure document capture and cloud fax platform for Legal, Financial, and Healthcare sectors.
  • Earned listing on U.K. Government's G-Cloud Framework for eight key Upland products, which enables U.K. public sector customers to easily purchase without having to run a full tender or competition procurement process.

Business Outlook

For the quarter ending December 31, 2019, Upland expects reported total revenue to be between $61.2 and $64.2 million, including subscription and support revenue between $57.6 and $60.0 million, for growth in recurring revenue of 41% at the mid-point over the quarter-ended December 31, 2018. Fourth quarter 2019 Adjusted EBITDA is expected to be between $23.4 and $24.8 million, for an Adjusted EBITDA margin of roughly 38% at the mid-point, representing growth of 44% at the mid-point over the quarter-ended December 31, 2018.

For the full year ending December 31, 2019, Upland expects reported total revenue to be between $217.8 and $220.8 million, including subscription and support revenue between $202.4 and $204.8 million, for growth in recurring revenue of 49% at the mid-point over the year ended December 31, 2018. Full year 2019 Adjusted EBITDA is expected to be between $81.0 and $82.4 million, for an Adjusted EBITDA margin of 37% at the mid-point, representing growth of 54% 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 1378274. 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.

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, unaudited, except per share data)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

Subscription and support

$

51,059

 

 

$

33,919

 

 

$

144,757

 

 

$

94,802

 

Perpetual license

 

975

 

 

 

915

 

 

 

2,207

 

 

 

3,224

 

Total product revenue

 

52,034

 

 

 

34,834

 

 

 

146,964

 

 

 

98,026

 

Professional services

 

3,031

 

 

 

2,310

 

 

 

9,607

 

 

 

6,679

 

Total revenue

 

55,065

 

 

 

37,144

 

 

 

156,571

 

 

 

104,705

 

Cost of revenue:

 

 

 

 

 

 

 

Subscription and support

 

14,678

 

 

 

10,566

 

 

 

42,574

 

 

 

29,395

 

Professional services

 

1,995

 

 

 

1,517

 

 

 

5,470

 

 

 

4,182

 

Total cost of revenue

 

16,673

 

 

 

12,083

 

 

 

48,044

 

 

 

33,577

 

Gross profit

 

38,392

 

 

 

25,061

 

 

 

108,527

 

 

 

71,128

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

8,709

 

 

 

5,299

 

 

 

23,680

 

 

 

14,955

 

Research and development

 

7,434

 

 

 

5,400

 

 

 

20,840

 

 

 

15,577

 

Refundable Canadian tax credits

 

(133

)

 

 

(99

)

 

 

(304

)

 

 

(404

)

General and administrative

 

12,196

 

 

 

8,011

 

 

 

34,232

 

 

 

23,475

 

Depreciation and amortization

 

6,427

 

 

 

3,606

 

 

 

17,430

 

 

 

9,589

 

Acquisition-related expenses

 

7,457

 

 

 

2,497

 

 

 

24,444

 

 

 

8,739

 

Total operating expenses

 

42,090

 

 

 

24,714

 

 

 

120,322

 

 

 

71,931

 

Loss from operations

 

(3,698

)

 

 

347

 

 

 

(11,795

)

 

 

(803

)

Other expense:

 

 

 

 

 

 

 

Interest expense, net

 

(5,517

)

 

 

(3,118

)

 

 

(15,879

)

 

 

(8,755

)

Loss on debt extinguishment

 

(2,317

)

 

 

 

(2,317

)

 

Other expense, net

 

(228

)

 

 

(744

)

 

 

(1,681

)

 

 

(965

)

Total other expense

 

(8,062

)

 

 

(3,862

)

 

 

(19,877

)

 

 

(9,720

)

Loss before provision for income taxes

 

(11,760

)

 

 

(3,515

)

 

 

(31,672

)

 

 

(10,523

)

Benefit from (provision for) income taxes

 

(547

)

 

 

(735

)

 

 

6,166

 

 

 

(2,118

)

Net loss

$

(12,307

)

 

$

(4,250

)

 

$

(25,506

)

 

$

(12,641

)

Net income (loss) per common share:

 

 

 

 

 

 

 

Basic

$

(0.50

)

 

$

(0.21

)

 

$

(1.13

)

 

$

(0.63

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

24,568,483

 

 

 

20,089,919

 

 

 

22,550,232

 

 

 

19,916,907

 

 
 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands, unaudited)

 

 

September 30,

 

December 31,

 

2019

 

2018

 

 

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

113,306

 

 

$

16,738

 

Accounts receivable, net of allowance

 

39,432

 

 

 

40,841

 

Deferred commissions, current

 

3,363

 

 

 

2,633

 

Unbilled receivables

 

4,827

 

 

 

3,694

 

Prepaid and other

 

4,898

 

 

 

3,382

 

Total current assets

 

165,826

 

 

 

67,288

 

Canadian tax credits receivable

 

2,885

 

 

 

1,573

 

Property and equipment, net

 

3,468

 

 

 

2,827

 

Operating lease right-of-use asset

 

5,692

 

 

Intangible assets, net

 

212,645

 

 

 

179,572

 

Goodwill

 

282,833

 

 

 

225,322

 

Deferred commissions, noncurrent

 

9,274

 

 

 

6,292

 

Other assets

 

789

 

 

 

324

 

Total assets

$

683,412

 

 

$

483,198

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

3,409

 

 

$

3,494

 

Accrued compensation

 

6,430

 

 

 

6,581

 

Accrued expenses and other current liabilities

 

14,743

 

 

 

16,666

 

Deferred revenue

 

59,663

 

 

 

57,626

 

Due to sellers

 

17,383

 

 

 

17,267

 

Operating lease liabilities, current

 

2,045

 

 

Current maturities of notes payable

 

2,476

 

 

 

6,015

 

Total current liabilities

 

106,149

 

 

 

107,649

 

Notes payable, less current maturities

 

339,167

 

 

 

273,713

 

Deferred revenue, noncurrent

 

127

 

 

 

578

 

Operating lease liabilities, noncurrent

 

3,985

 

 

Noncurrent deferred tax liability, net

 

11,667

 

 

 

13,311

 

Other long-term liabilities

 

4,029

 

 

 

640

 

Total liabilities

 

465,124

 

 

 

395,891

 

Stockholders’ equity:

 

 

 

Common stock

 

3

 

 

 

2

 

Additional paid-in capital

 

344,637

 

 

 

180,481

 

Accumulated other comprehensive loss

 

(15,171

)

 

 

(7,501

)

Accumulated deficit

 

(111,181

)

 

 

(85,675

)

Total stockholders’ equity

 

218,288

 

 

 

87,307

 

Total liabilities and stockholders’ equity

$

683,412

 

 

$

483,198

 

 
 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

 

 

 

 

Nine Months Ended September 30,

 

2019

 

2018

 

 

 

 

Operating activities

 

 

 

Net loss

$

(25,506

)

 

$

(12,641

)

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

 

 

 

Depreciation and amortization

 

23,722

 

 

 

14,604

 

Deferred income taxes

 

(11,176

)

 

 

421

 

Amortization of deferred commissions

 

2,555

 

 

 

1,709

 

Foreign currency re-measurement loss

 

155

 

 

 

105

 

Non-cash interest and other expense

 

979

 

 

 

616

 

Non-cash stock compensation expense

 

18,716

 

 

 

10,380

 

Non-cash loss on debt extinguishment

 

2,317

 

 

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

 

 

 

Accounts receivable

 

6,405

 

 

 

3,173

 

Prepaids and other

 

(4,280

)

 

 

(3,115

)

Accounts payable

 

(903

)

 

 

(679

)

Accrued expenses and other liabilities

 

(5,037

)

 

 

(7,097

)

Deferred revenue

 

(2,893

)

 

 

(2,679

)

Net cash provided by operating activities

 

5,054

 

 

 

4,797

 

Investing activities

 

 

 

Purchase of property and equipment

 

(723

)

 

 

(643

)

Purchase of customer relationships

 

(438

)

 

Purchase business combinations, net of cash acquired

 

(105,771

)

 

 

(47,850

)

Net cash used in investing activities

 

(106,932

)

 

 

(48,493

)

Financing activities

 

 

 

Payments on finance leases

 

(499

)

 

 

(893

)

Proceeds from notes payable, net of issuance costs

 

382,306

 

 

 

49,375

 

Payments on notes payable

 

(323,218

)

 

 

(2,907

)

Taxes paid related to net share settlement of equity awards

 

(6,108

)

 

 

(4,642

)

Issuance of common stock, net of issuance costs

 

151,549

 

 

 

858

 

Additional consideration paid to sellers of businesses

 

(5,886

)

 

 

(4,294

)

Net cash provided by financing activities

 

198,144

 

 

 

37,497

 

Effect of exchange rate fluctuations on cash

 

302

 

 

 

(38

)

Change in cash and cash equivalents

 

96,568

 

 

 

(6,237

)

Cash and cash equivalents, beginning of period

 

16,738

 

 

 

22,326

 

Cash and cash equivalents, end of period

$

113,306

 

 

$

16,089

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for interest

$

17,554

 

 

$

8,170

 

Cash paid for taxes

$

2,185

 

 

$

2,480

 

Sales commissions paid, net of amortization of deferred commissions

$

3,712

 

 

$

1,327

 

Noncash investing and financing activities:

 

 

 

Business combination consideration including holdbacks and earnouts

$

7,926

 

 

$

13,281

 

Equipment acquired pursuant to capital lease obligations

$

44

 

 

$

 
 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

Reconciliation of net income (loss) to Adjusted EBITDA:

 

 

 

 

 

 

 

Net loss

$

(12,307

)

 

$

(4,250

)

 

$

(25,506

)

 

$

(12,641

)

Add:

 

 

 

 

 

 

 

Depreciation and amortization expense

 

8,570

 

 

 

5,387

 

 

 

23,722

 

 

 

14,604

 

Interest expense, net

 

5,517

 

 

 

3,118

 

 

 

15,879

 

 

 

8,755

 

Other expense (income), net

 

228

 

 

 

744

 

 

 

1,681

 

 

 

965

 

Loss on debt extinguishment

 

2,317

 

 

 

 

2,317

 

 

Provision for income taxes

 

547

 

 

 

735

 

 

 

(6,166

)

 

 

2,118

 

Stock-based compensation expense

 

7,187

 

 

 

3,781

 

 

 

18,716

 

 

 

10,380

 

Acquisition-related expense

 

7,457

 

 

 

2,497

 

 

 

24,444

 

 

 

8,739

 

Purchase accounting deferred revenue discount

 

1,176

 

 

 

1,052

 

 

 

2,458

 

 

 

3,470

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

20,692

 

 

$

13,064

 

 

$

57,545

 

 

$

36,390

 

 
 

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,

 

2019

 

2018

 

2019

 

2018

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

 

 

 

 

 

 

 

Net income (loss)

$

(12,307

)

 

$

(4,250

)

 

$

(25,506

)

 

$

(12,641

)

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

 

7,187

 

 

 

3,781

 

 

 

18,716

 

 

 

10,380

 

Amortization of purchased intangibles

 

8,012

 

 

 

4,844

 

 

 

22,053

 

 

 

12,945

 

Amortization of debt discount

 

414

 

 

 

212

 

 

 

979

 

 

 

616

 

Acquisition-related expense

 

7,457

 

 

 

2,497

 

 

 

24,444

 

 

 

8,739

 

Loss on debt extinguishment

 

2,317

 

 

 

 

2,317

 

 

Purchase accounting deferred revenue discount

 

1,176

 

 

 

1,052

 

 

 

2,458

 

 

 

3,470

 

Tax effect of adjustments above

 

(1,065

)

 

 

(59

)

 

 

(3,804

)

 

 

(135

)

 

 

 

 

 

 

 

 

Non-GAAP net income

$

13,191

 

 

$

8,077

 

 

$

41,657

 

 

$

23,374

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding, basic

 

24,568,483

 

 

 

20,089,919

 

 

 

22,550,232

 

 

 

19,916,907

 

Weighted average ordinary shares outstanding, diluted

 

25,425,335

 

 

 

21,152,333

 

 

 

23,383,406

 

 

 

20,937,223

 

Non-GAAP earnings per share, basic

$

0.54

 

 

$

0.40

 

 

$

1.85

 

 

$

1.17

 

Non-GAAP earnings per share, diluted

$

0.52

 

 

$

0.38

 

 

$

1.78

 

 

$

1.12

 

 
 

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

Stock-based compensation:

 

 

 

 

 

 

 

Cost of revenue

$

250

 

$

195

 

$

763

 

$

464

Research and development

 

683

 

 

383

 

 

1,637

 

 

871

Sales and marketing

 

508

 

 

169

 

 

1,012

 

 

368

General and administrative

 

5,746

 

 

3,034

 

 

15,304

 

 

8,677

Total

$

7,187

 

$

3,781

 

$

18,716

 

$

10,380

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

Depreciation:

 

 

 

 

 

 

 

Cost of revenue

$

197

 

$

406

 

$

716

 

$

1,269

Operating expense

 

361

 

 

137

 

 

953

 

 

390

Total

$

558

 

$

543

 

$

1,669

 

$

1,659

 

 

 

 

 

 

 

 

Amortization:

 

 

 

 

 

 

 

Cost of revenue

$

1,946

 

$

1,375

 

$

5,576

 

$

3,746

Operating expense

 

6,066

 

 

3,469

 

 

16,477

 

 

9,199

Total

$

8,012

 

$

4,844

 

$

22,053

 

$

12,945

 

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