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Upland Software Reports Second Quarter 2022 Financial Results

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AUSTIN, Texas, August 03, 2022--(BUSINESS WIRE)--Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the second quarter 2022 and issued guidance for its third quarter and full year of 2022.

Second Quarter 2022 Financial Highlights

  • Total revenue was $80.2 million, an increase of 5% from $76.3 million in the second quarter of 2021. Revenue growth includes a negative impact of 3 percentage points from changes in foreign currency exchange rates ("FX").

  • Subscription and support revenue was $75.0 million, an increase of 4% from $72.4 million in the second quarter of 2021. Revenue growth includes a negative impact of 2 percentage points from FX.

  • GAAP net loss was $16.4 million, or a loss of $0.52 cents per share, compared to a GAAP net loss of $19.0 million, or a loss of $0.63 cents per share, in the second quarter of 2021.

  • Adjusted EBITDA was $24.5 million, or 31% of total revenue, compared to $23.7 million, or 31% of total revenue, in the second quarter of 2021.

  • GAAP operating cash flow was $14.0 million, compared to GAAP operating cash flow of $10.8 million in the second quarter of 2021. Free cash flow was $13.9 million, compared to free cash flow of $10.6 million in the second quarter of 2021.

  • Cash on hand as of the end of the second quarter of 2022 was $138.3 million. Pro forma for the recently announced $115 million equity investment from HGGC, net of estimated fees and expenses, Upland's cash on hand at the end of the second quarter would have been $248.3 million.

"We had a strong Q2, beating our guidance midpoints on revenue and Adjusted EBITDA, even after FX headwinds, and outperforming our targets on operating and free cash flow," said Jack McDonald, Upland's chairman and chief executive officer. "In addition, after the quarter close, we announced a $115 million strategic equity investment from HGGC, a leading $6.8 billion private equity firm with a proven track record of building value in the software industry by partnering with management teams to enhance customer value and drive growth."

Second Quarter Business Highlights

  • We expanded relationships with 403 existing customers, 53 of which were major expansions. We also welcomed 123 new customers to Upland in the second quarter, including 27 new major customers.

  • Altify’s Spring 2022 release introduced Altify Account Plan: a long-awaited capability that allows sellers to get going faster by starting to work on their assigned accounts directly from account records in Salesforce.

  • Objectif Lune announced a series of customer-driven enhancements aimed at supporting complex business communications and digital transformation efficiency in their first major release post-acquisition.

  • InGenius announced that its CRM telephony integration is now available as a premium application on Genesys AppFoundry® — the industry’s largest dedicated marketplace focused on customer experience solutions.

  • Subsequent to quarter end, Upland announced a $115 million strategic equity investment from HGGC, in a new class of preferred stock convertible into shares of Upland common stock at a conversion price of $17.50 per share, a premium over Upland's current share price, and carrying a 4.5% dividend, payable at the company's option in cash or in-kind. The HGGC investment is expected to close promptly following the satisfaction of customary terms and conditions, including the expiration of the Hart-Scott-Rodino Act notice period.

Business Outlook

Upland's forward guidance remains unchanged in constant currency. Since May 4, 2022, the U.S. dollar has strengthened resulting in a larger FX headwind in both Q3 2022 and full year 2022 (the total FX impact is estimated to be approximately a 1.5 percentage points currency headwind for 2022 revenue growth and a $1.5 million currency headwind for 2022 Adjusted EBITDA). The adjusted guidance below includes the impact of those FX headwinds in the period.

For the quarter ending September 30, 2022, Upland expects reported total revenue to be between $75.7 and $81.7 million, including subscription and support revenue between $70.8 and $76.2 million, for growth in total revenue of 3% at the mid-point over the quarter-ended September 30, 2021. Third quarter 2022 Adjusted EBITDA is expected to be between $23.2 and $26.2 million, for an Adjusted EBITDA margin of 31% at the mid-point. This Adjusted EBITDA guide at the mid-point is a decrease of 1% from the quarter-ended September 30, 2021.

For the full year ending December 31, 2022, Upland expects reported total revenue to be between $310.5 and $322.5 million, including subscription and support revenue between $290.4 and $301.2 million, for growth in total revenue of 5% at the mid-point over the year ended December 31, 2021. Full year 2022 Adjusted EBITDA is expected to be between $94.5 and $100.5 million, for an Adjusted EBITDA margin of 30% at the mid-point. This Adjusted EBITDA guide at the midpoint is an increase of 1% over the year ended December 31, 2021.

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 1-844-200-6205 in the United States or +1-929-526-1599 if outside the United States. Attendees will need to use access code 452682 to join the call. 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 1,800+ 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. Additionally, we are unable to quantify the impact of foreign currency exchange fluctuations on components of our income statement beyond revenues because the information which is needed to do so 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 or sustain profitability or predict future results; our plans regarding future acquisitions and our ability to consummate and integrate acquisitions; our ability to expand our go to market operations, including our marketing and sales organization, and successfully increase sales of our products; our ability to obtain financing in the future on acceptable terms or at all; our expectations with respect to revenue, cost of revenue and operating expenses in future periods; our expectations with regard to revenue from perpetual licenses and professional services; our ability to adapt to the impacts on the global economy associated with the ongoing COVID-19 pandemic; our ability to attract and retain customers; our ability to successfully enter new markets and manage our international expansion; our ability to comply with privacy laws and regulations; our ability to deliver high-quality customer service; our plans regarding, and our ability to effectively manage, our growth; maintaining our senior management team and key personnel; the performance of our resellers; our ability to adapt to changing market conditions and competition; our ability to adapt to technological change and continue to innovate; economic and financial conditions; the growth of demand for cloud-based, digital transformation applications; our ability to integrate our applications with other software applications; maintaining and expanding our relationships with third parties; costs associated with defending intellectual property infringement and other claims; our ability to maintain, protect and enhance our brand and intellectual property; our expectations with regard to trends, such as seasonality, which affect our business; our plans with respect to foreign currency exchange risk and inflation; our beliefs regarding how our applications benefit customers and what our competitive strengths are; the operation, reliability and security of our third-party data centers; the risk that we did not consider another contingency included in this list; our expectations as to the payment of dividends ; 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,

2022

2021

2022

2021

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenue:

Subscription and support

$

75,017

$

72,405

$

148,644

$

143,058

Perpetual license

1,858

415

3,636

767

Total product revenue

76,875

72,820

152,280

143,825

Professional services

3,352

3,444

6,663

6,408

Total revenue

80,227

76,264

158,943

150,233

Cost of revenue:

Subscription and support

24,125

23,161

46,194

45,843

Professional services and other

2,428

1,851

5,114

3,596

Total cost of revenue

26,553

25,012

51,308

49,439

Gross profit

53,674

51,252

107,635

100,794

Operating expenses:

Sales and marketing

15,331

14,298

30,924

26,730

Research and development

11,676

11,113

23,743

22,053

General and administrative

21,828

19,192

41,442

43,561

Depreciation and amortization

10,802

10,278

21,853

20,021

Acquisition-related expenses

4,925

5,534

15,338

15,120

Total operating expenses

64,562

60,415

133,300

127,485

Loss from operations

(10,888

)

(9,163

)

(25,665

)

(26,691

)

Other expense:

Interest expense, net

(7,754

)

(7,942

)

(15,516

)

(15,729

)

Other income (expense), net

1,777

(399

)

1,359

(162

)

Total other expense

(5,977

)

(8,341

)

(14,157

)

(15,891

)

Loss before benefit from (provision for) income taxes

(16,865

)

(17,504

)

(39,822

)

(42,582

)

Benefit from (provision for) income taxes

472

(1,538

)

598

2,856

Net loss

$

(16,393

)

$

(19,042

)

$

(39,224

)

$

(39,726

)

Net loss per common share, basic and diluted

$

(0.52

)

$

(0.63

)

$

(1.25

)

$

(1.32

)

Weighted-average common shares outstanding, basic and diluted

31,380,505

30,097,749

31,272,489

30,034,252

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2022

2021

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

138,284

$

189,158

Accounts receivable, net of allowance

35,120

50,499

Deferred commissions, current

10,467

9,824

Unbilled receivables

5,202

4,801

Prepaid expenses and other current assets

16,739

8,709

Total current assets

205,812

262,991

Tax credits receivable

3,383

3,345

Property and equipment, net

2,165

2,667

Operating lease right-of-use asset

6,566

6,454

Intangible assets, net

277,001

279,920

Goodwill

492,481

457,472

Deferred commissions, noncurrent

15,400

14,808

Interest rate swap assets

25,959

Other assets

1,279

1,350

Total assets

$

1,030,046

$

1,029,007

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

21,262

$

20,362

Accrued compensation

12,841

9,829

Accrued expenses and other current liabilities

13,829

9,086

Deferred revenue

103,442

102,847

Liabilities due to sellers of businesses

12,157

7,607

Operating lease liabilities, current

3,840

3,546

Current maturities of notes payable

3,167

3,167

Total current liabilities

170,538

156,444

Notes payable, less current maturities

513,558

515,163

Deferred revenue, noncurrent

3,967

2,058

Operating lease liabilities, noncurrent

6,369

6,773

Noncurrent deferred tax liability, net

22,678

22,793

Interest rate swap liabilities

8,409

Other long-term liabilities

1,006

1,079

Total liabilities

718,116

712,719

Stockholders’ equity:

Common stock

3

3

Additional paid-in capital

594,080

568,384

Accumulated other comprehensive income (loss)

(2,344

)

(11,514

)

Accumulated deficit

(279,809

)

(240,585

)

Total stockholders’ equity

311,930

316,288

Total liabilities and stockholders’ equity

$

1,030,046

$

1,029,007

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Operating activities

Net loss

$

(16,393

)

$

(19,042

)

$

(39,224

)

$

(39,726

)

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

Depreciation and amortization

13,931

13,201

28,193

25,669

Change in fair value of liabilities due to sellers of businesses

(2,729

)

(75

)

(2,729

)

Deferred income taxes

(1,066

)

1,951

(2,407

)

(3,389

)

Amortization of deferred costs

2,987

2,081

5,883

3,848

Foreign currency re-measurement loss

3

(4

)

3

10

Non-cash interest and other expense

560

561

1,115

1,115

Non-cash stock compensation expense

14,877

13,550

26,496

31,374

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

Accounts receivable

12,905

6,599

22,087

10,174

Prepaid expenses and other current assets

(6,384

)

(2,616

)

(4,597

)

(3,631

)

Accounts payable

3,247

1,375

(898

)

5,915

Accrued expenses and other liabilities

(364

)

(648

)

(5,154

)

(2,424

)

Deferred revenue

(10,265

)

(3,474

)

(9,162

)

(2,898

)

Net cash provided by operating activities

14,038

10,805

22,260

23,308

Investing activities

Purchase of property and equipment

(121

)

(225

)

(297

)

(507

)

Purchase business combinations, net of cash acquired

(23

)

(19,799

)

(62,356

)

(92,417

)

Net cash used in investing activities

(144

)

(20,024

)

(62,653

)

(92,924

)

Financing activities

Payments on finance leases

(4

)

Proceeds from notes payable, net of issuance costs

(17

)

(113

)

(20

)

(113

)

Payments on notes payable

(1,350

)

(1,350

)

(2,700

)

(2,700

)

Taxes paid related to net share settlement of equity awards

(435

)

(982

)

Issuance of common stock, net of issuance costs

177

182

178

Additional consideration paid to sellers of businesses

(595

)

(3,088

)

(742

)

Net cash used in financing activities

(2,397

)

(1,286

)

(6,608

)

(3,381

)

Effect of exchange rate fluctuations on cash

(3,656

)

372

(3,873

)

(493

)

Change in cash and cash equivalents

7,841

(10,133

)

(50,874

)

(73,490

)

Cash and cash equivalents, beginning of period

130,443

186,672

189,158

250,029

Cash and cash equivalents, end of period

$

138,284

$

176,539

$

138,284

$

176,539

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Reconciliation of net loss to Adjusted EBITDA:

Net loss

$

(16,393

)

$

(19,042

)

$

(39,224

)

$

(39,726

)

Add:

Depreciation and amortization expense

13,931

13,201

28,193

25,669

Interest expense, net

7,754

7,942

15,516

15,729

Other expense (income), net

(1,777

)

399

(1,359

)

162

Provision for (benefit from) income taxes

(472

)

1,538

(598

)

(2,856

)

Stock-based compensation expense

14,877

13,550

26,496

31,374

Acquisition-related expense

4,925

5,534

15,338

15,120

Purchase accounting deferred revenue discount

1,663

606

3,592

1,100

Adjusted EBITDA

$

24,508

$

23,728

$

47,954

$

46,572

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,

2022

2021

2022

2021

Reconciliation of net loss to non-GAAP net income:

Net loss

$

(16,393

)

$

(19,042

)

$

(39,224

)

$

(39,726

)

Add:

Stock-based compensation expense

14,877

13,550

26,496

31,374

Amortization of purchased intangibles

13,536

12,732

27,361

24,745

Amortization of debt discount

560

561

1,115

1,115

Acquisition-related expense

4,925

5,534

15,338

15,120

Purchase accounting deferred revenue discount

1,663

606

3,592

1,100

Tax effect of adjustments above

(1,939

)

(1,361

)

(4,542

)

(2,675

)

Non-GAAP net income

$

17,229

$

12,580

$

30,136

$

31,053

Weighted average ordinary shares outstanding, basic

31,380,505

30,097,749

31,272,489

30,034,252

Weighted average ordinary shares outstanding, diluted

31,547,552

30,695,700

31,456,240

30,648,957

Non-GAAP earnings per share, basic

$

0.55

$

0.42

$

0.96

$

1.03

Non-GAAP earnings per share, diluted

$

0.55

$

0.41

$

0.96

$

1.01

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,

2022

2021

2022

2021

Reconciliation of Operating Cash Flow to Free Cash Flow:

Net cash provided by operating activities

$

14,038

$

10,805

$

22,260

$

23,308

Less: Purchase of Property and Equipment

(121

)

(225

)

(297

)

(507

)

Free Cash Flow

$

13,917

$

10,580

$

21,963

$

22,801

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Stock-based compensation:

Cost of revenue

$

575

$

563

$

977

$

1,005

Research and development

658

942

1,406

1,656

Sales and marketing

1,498

1,619

2,972

2,756

General and administrative

12,146

10,426

21,141

25,957

Total

$

14,877

$

13,550

$

26,496

$

31,374

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Depreciation:

Cost of revenue

$

2

$

11

$

4

$

22

Operating expense

393

458

828

902

Total

$

395

$

469

$

832

$

924

Amortization:

Cost of revenue

$

3,127

$

2,912

$

6,336

$

5,626

Operating expense

10,409

9,820

21,025

19,119

Total

$

13,536

$

12,732

$

27,361

$

24,745

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802006206/en/

Contacts

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

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