Press release

Upland Software Reports First Quarter 2021 Financial Results

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

First Quarter 2021 Financial Highlights

  • Total revenue was $74.0 million, an increase of 9% from $68.0 million in the first quarter of 2020.
  • Subscription and support revenue was $70.7 million, an increase of 11% from $63.9 million in the first quarter of 2020.
  • GAAP net loss was $20.7 million, or a loss of $0.69 cents per share, compared to a GAAP net loss of $20.1 million, or a loss of $0.81 cents per share, in the first quarter of 2020.
  • Adjusted EBITDA was $22.8 million, or 31% of total revenue, a decrease of 7% from $24.6 million, or 36% of total revenue, in the first quarter of 2020.
  • GAAP operating cash flow was $12.5 million, an increase from $5.3 million of GAAP operating cash outflow in the first quarter of 2020. Free cash flow was $12.2 million, an increase from $5.6 million of free cash outflow in the first quarter of 2020.
  • Cash on hand as of the end of the first quarter of 2021 was $186.7 million.

“In Q1, we restarted our M&A engine, completing two strategic and accretive acquisitions,” 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.”

First Quarter Business Highlights

  • Expanded relationships with 283 existing customers, 45 of which were major expansions. We also welcomed 118 new customers to Upland in Q1, including 32 new major customers.
  • Expanded security and collaboration capabilities across the Upland product portfolio with three major releases and five feature packs. In our Project & IT Management product suite, delivered key product integrations with Salesforce and Sage Intacct and user experience updates. Following the Upland and HP joint announcement in the fall, released essential application updates to our Document Workflow product suite to support the HP Workpath offering.
  • Closed the acquisition of Second Street, an audience development platform, adding proven contest and interactive content tools that deliver richer consumer engagement for Upland’s Customer Experience Management (CXM) suite customers.
  • Closed the acquisition of BlueVenn, a leading customer data platform, anchoring Upland’s Customer Experience Management (CXM) suite with a single view of the customer that will drive deeper engagement across email, SMS, mobile application, and online.

Business Outlook

For the quarter ending June 30, 2021, Upland expects reported total revenue to be between $73.0 and $77.0 million, including subscription and support revenue between $70.2 and $73.2 million, for growth in recurring revenue of 6% at the mid-point over the quarter-ended June 30, 2020. Second quarter 2021 Adjusted EBITDA is expected to be between $22.0 and $24.0 million, for an Adjusted EBITDA margin of 31% at the mid-point, representing a reduction of 3% at the mid-point over the quarter-ended June 30, 2020, reflecting our incremental investment in our go-to-market activities.

For the full year ending December 31, 2021, Upland expects reported total revenue to be between $299.0 and $311.0 million, including subscription and support revenue between $285.3 and $295.3 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 $94.4 and $100.4 million, for an Adjusted EBITDA margin of 32% at the mid-point, representing reduction of 3% at the mid-point over the year ended December 31, 2020, reflecting our incremental investment 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: 10153909. 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.

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 March 31,

 

2021

 

2020

 

(unaudited)

 

(unaudited)

Revenue:

 

 

 

Subscription and support

$

70,653

 

 

$

63,891

 

Perpetual license

352

 

 

361

 

Total product revenue

71,005

 

 

64,252

 

Professional services

2,964

 

 

3,780

 

Total revenue

73,969

 

 

68,032

 

Cost of revenue:

 

 

 

Subscription and support

22,682

 

 

19,939

 

Professional services and other

1,745

 

 

2,262

 

Total cost of revenue

24,427

 

 

22,201

 

Gross profit

49,542

 

 

45,831

 

Operating expenses:

 

 

 

Sales and marketing

12,432

 

 

10,931

 

Research and development

10,940

 

 

9,118

 

General and administrative

24,369

 

 

16,676

 

Depreciation and amortization

9,743

 

 

9,271

 

Acquisition-related expenses

9,586

 

 

15,158

 

Total operating expenses

67,070

 

 

61,154

 

Income (loss) from operations

(17,528

)

 

(15,323

)

Other expense:

 

 

 

Interest expense, net

(7,787

)

 

(7,643

)

Other income (expense), net

237

 

 

(1,402

)

Total other expense

(7,550

)

 

(9,045

)

Loss before benefit from income taxes

(25,078

)

 

(24,368

)

Benefit from income taxes

4,394

 

 

4,287

 

Net loss

$

(20,684

)

 

$

(20,081

)

Net loss per common share, basic and diluted

$

(0.69

)

 

$

(0.81

)

Weighted-average common shares outstanding, basic and diluted

29,970,050

 

 

24,906,932

 

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

March 31,

 

December 31,

 

2021

 

2020

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

186,672

 

 

$

250,029

 

Accounts receivable, net of allowance

43,547

 

 

44,472

 

Deferred commissions, current

6,976

 

 

5,784

 

Unbilled receivables

5,088

 

 

4,561

 

Prepaid and other

8,540

 

 

12,694

 

Total current assets

250,823

 

 

317,540

 

Tax credits receivable

2,607

 

 

2,427

 

Property and equipment, net

3,429

 

 

2,778

 

Operating lease right-of-use asset

8,720

 

 

10,124

 

Intangible assets, net

305,877

 

 

279,975

 

Goodwill

448,558

 

 

383,598

 

Deferred commissions, noncurrent

13,327

 

 

12,962

 

Other assets

1,776

 

 

1,816

 

Total assets

$

1,035,117

 

 

$

1,011,220

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

12,912

 

 

$

5,395

 

Accrued compensation

8,761

 

 

8,138

 

Accrued expenses and other current liabilities

13,076

 

 

13,438

 

Deferred revenue

94,693

 

 

87,552

 

Due to sellers

11,172

 

 

416

 

Operating lease liabilities, current

3,461

 

 

3,315

 

Current maturities of notes payable

3,170

 

 

3,166

 

Total current liabilities

147,245

 

 

121,420

 

Notes payable, less current maturities

517,636

 

 

518,437

 

Deferred revenue, noncurrent

1,339

 

 

1,587

 

Operating lease liabilities, noncurrent

8,859

 

 

8,387

 

Noncurrent deferred tax liability, net

26,607

 

 

24,092

 

Interest rate swap liabilities

14,581

 

 

30,032

 

Other long-term liabilities

1,190

 

 

650

 

Total liabilities

717,457

 

 

704,605

 

Stockholders’ equity:

 

 

 

Common stock

3

 

 

3

 

Additional paid-in capital

533,044

 

 

515,219

 

Accumulated other comprehensive loss

(12,330

)

 

(26,234

)

Accumulated deficit

(203,057

)

 

(182,373

)

Total stockholders’ equity

317,660

 

 

306,615

 

Total liabilities and stockholders’ equity

$

1,035,117

 

 

$

1,011,220

 

 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Three Months Ended March 31,

 

2021

 

2020

 

(unaudited)

 

(unaudited)

Operating activities

 

 

 

Net loss

$

(20,684

)

 

$

(20,081

)

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

 

 

 

Depreciation and amortization

12,468

 

 

11,737

 

Deferred income taxes

(5,340

)

 

(4,348

)

Amortization of deferred costs

1,767

 

 

894

 

Foreign currency re-measurement loss

14

 

 

587

 

Non-cash interest and other expense

554

 

 

552

 

Non-cash stock compensation expense

17,824

 

 

9,320

 

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

 

 

 

Accounts receivable

3,575

 

 

(1,664

)

Prepaids and other

(1,015

)

 

(2,778

)

Accounts payable

4,540

 

 

(3,439

)

Accrued expenses and other liabilities

(1,776

)

 

(5,942

)

Deferred revenue

576

 

 

9,853

 

Net cash provided by (used in) operating activities

12,503

 

 

(5,309

)

Investing activities

 

 

 

Purchase of property and equipment

(282

)

 

(296

)

Purchase of customer relationships

 

 

(201

)

Purchase business combinations, net of cash acquired

(72,618

)

 

(67,651

)

Net cash used in investing activities

(72,900

)

 

(68,148

)

Financing activities

 

 

 

Payments on finance leases

(4

)

 

(55

)

Proceeds from notes payable, net of issuance costs

 

 

(72

)

Payments on notes payable

(1,350

)

 

(1,350

)

Taxes paid related to net share settlement of equity awards

 

 

(768

)

Issuance of common stock, net of issuance costs

1

 

 

41

 

Additional consideration paid to sellers of businesses

(742

)

 

(1,000

)

Net cash used in financing activities

(2,095

)

 

(3,204

)

Effect of exchange rate fluctuations on cash

(865

)

 

325

 

Change in cash and cash equivalents

(63,357

)

 

(76,336

)

Cash and cash equivalents, beginning of period

250,029

 

 

175,024

 

Cash and cash equivalents, end of period

$

186,672

 

 

$

98,688

 

 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

 

Three Months Ended March 31,

 

2021

 

2020

Reconciliation of net loss to Adjusted EBITDA:

 

 

 

Net loss

$

(20,684

)

 

$

(20,081

)

Add:

 

 

 

Depreciation and amortization expense

12,468

 

 

11,737

 

Interest expense, net

7,787

 

 

7,643

 

Other expense (income), net

(237

)

 

1,402

 

Benefit from income taxes

(4,394

)

 

(4,287

)

Stock-based compensation expense

17,824

 

 

9,320

 

Acquisition-related expense

9,586

 

 

15,158

 

Purchase accounting deferred revenue discount

494

 

 

3,701

 

Adjusted EBITDA

$

22,844

 

 

$

24,593

 

 

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 March 31,

 

2021

 

2020

Reconciliation of net loss to non-GAAP net income:

 

 

 

Net loss

$

(20,684

)

 

$

(20,081

)

Add:

 

 

 

Stock-based compensation expense

17,824

 

 

9,320

 

Amortization of purchased intangibles

12,013

 

 

11,205

 

Amortization of debt discount

554

 

 

552

 

Acquisition-related expense

9,586

 

 

15,158

 

Purchase accounting deferred revenue discount

494

 

 

3,701

 

Tax effect of adjustments above

(1,314

)

 

(1,723

)

Non-GAAP net income

$

18,473

 

 

$

18,132

 

 

 

 

 

Weighted average ordinary shares outstanding, basic

29,970,050

 

 

24,906,932

 

Weighted average ordinary shares outstanding, diluted

30,589,272

 

 

25,352,702

 

Non-GAAP earnings per share, basic

$

0.62

 

 

$

0.73

 

Non-GAAP earnings per share, diluted

$

0.60

 

 

$

0.72

 

 

Upland Software, Inc.

Reconciliation of Operating Cash Flow to Free Cash Flow

(in thousands, unaudited)

 

Three Months Ended March 31,

 

2021

 

2020

Reconciliation of Operating Cash Flow to Free Cash Flow:

 

 

 

Net cash provided by (used in) operating activities

$

12,503

 

 

$

(5,309

)

Less: Purchase of Property and Equipment

(282

)

 

(296

)

Free Cash Flow

$

12,221

 

 

$

(5,605

)

 

Upland Software, Inc.

Supplemental Financial Information

(in thousands)

 

Three Months Ended March 31,

 

2021

 

2020

 

(unaudited)

 

(unaudited)

Stock-based compensation:

 

 

 

Cost of revenue

$

442

 

 

$

318

 

Research and development

714

 

 

615

 

Sales and marketing

1,137

 

 

549

 

General and administrative

15,531

 

 

7,838

 

Total

$

17,824

 

 

$

9,320

 

 

 

Three Months Ended March 31,

 

2021

 

2020

 

(unaudited)

 

(unaudited)

Depreciation:

 

 

 

Cost of revenue

$

11

 

 

$

71

 

Operating expense

444

 

 

461

 

Total

$

455

 

 

$

532

 

 

 

 

 

Amortization:

 

 

 

Cost of revenue

$

2,714

 

 

$

2,395

 

Operating expense

9,299

 

 

8,810

 

Total

$

12,013

 

 

$

11,205