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What's in Store for Upland Software's (UPLD) Q2 Earnings?

Zacks Equity Research

Upland Software UPLD is set to report second-quarter 2019 results on Aug 7.

The company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 7.8%.

In the last reported quarter, Upland’s adjusted earnings of 53 cents per share beat the Zacks Consensus Estimate by a penny. The figure jumped 43.2% year over year.

Revenues of $48.5 million surged 53.4% on a year-over-year basis. Growth was driven by more than 60% increase in recurring revenues.

Q2 Guidance Revised

Following the Kapost acquisition on May 28, Upland revised its previous guidance for second-quarter 2019. The company forecasts revenues between $50.5 million and $52.5 million (up from $49.9-$51.9 million), including subscription and support revenues of $47.2-$48.8 million (up from $46.7-$48.3 million).

At mid-point of the guidance range, recurring revenue growth is anticipated to be 45% year over year (up previous guidance of 43% growth at mid-point).

Adjusted EBITDA is expected between $17.9 million and $18.9 million (up from previous guidance range of $17.7-$18.7 million). At mid-point, adjusted EBITDA margin is almost 36%.

Upland Software, Inc. Price and EPS Surprise

Upland Software, Inc. Price and EPS Surprise

Upland Software, Inc. price-eps-surprise | Upland Software, Inc. Quote

Notably, the Kapost acquisition adds approximately $15 million in annualized revenues and is immediately accretive to Upland's adjusted EBITDA per share.

The Zacks Consensus Estimate for revenues is currently pegged at $51.4 million, which indicates growth of almost 43% from the figure reported in the year-ago quarter.

Further, the consensus mark for second-quarter earnings has been steady at 49 cents over the past 30 days.

Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider

Upland’s top line in the second quarter is expected to be driven by portfolio strength and improved product capabilities that are helping it win new customers.

Notably, in the last reported quarter, Upland signed 161 new customers and expanded relationships with 231 existing customers. The company has a broad clientele of more than 9,000, of which 1,300 are major customers across various industries, each accounting for roughly $106,000 in annual recurring revenues.

Moreover, acquisitions like Kapost, PostUp, Rant & Rave, and Adestra, among others, play a key role in driving Upland’s growth.

Acquisitions are helping the company rapidly penetrate different markets, including Customer Experience Management, Professional Services Automation, Document Automation, Project & Financial Management, Enterprise Sales Enablement, and Knowledge Management.

Upland estimates the total addressable market for its solutions to be $25 billion, which presents significant growth opportunity.

The company is also benefiting from the strong adoption of the UplandOne operating platform. Moreover, improving cross-selling opportunity is expected to drive the top line in the to-be-reported quarter.

However, higher acquisition expenses are expected to dent profitability.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.  Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Upland Software has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter:

Callaway Golf ELY has an Earnings ESP of +6.40% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CACI International CACI has an Earnings ESP of +4.02% and a Zacks Rank #2.

Cisco Systems CSCO has an Earnings ESP of +1.53% and a Zacks Rank #2.

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