Upland Software Reports First Quarter 2024 Financial Results

AUSTIN, Texas--(BUSINESS WIRE)--Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the first quarter 2024 and issued guidance for its second quarter and full year of 2024.

First Quarter 2024 Financial Highlights

• Total revenue was $70.7 million, a decrease of 8% from $77.1 million in the first quarter of 2023.
• Subscription and support revenue was $67.1 million, a decrease of 8% from $72.9 million in the first quarter of 2023.
• GAAP net loss was $96.1 million compared to a GAAP net loss of $140.0 million in the first quarter of 2023. GAAP net loss attributable to common stockholders was $97.5 million compared to GAAP net loss attributable to common stockholders of $141.4 million in the first quarter of 2023. GAAP net loss per share attributable to common stockholders was $3.37 per share, compared to a GAAP net loss per share attributable to common stockholders of $4.38 per share in the first quarter of 2023. This quarter over quarter change in GAAP net loss is primarily attributable to goodwill impairments of $87.2 million in the first quarter of 2024 compared to $128.8 million in the first quarter of 2023.
• Adjusted EBITDA was $13.1 million, or 19% of total revenue, compared to $17.6 million, or 23% of total revenue, in the first quarter of 2023.
• GAAP operating cash flow was $5.1 million, compared to GAAP operating cash flow of $15.8 million in the first quarter of 2023. Free cash flow was $4.9 million, compared to free cash flow of $15.6 million in the first quarter of 2023.
• Cash on hand as of the end of the first quarter of 2024 was $231.6 million, after buying back $7.9 million in outstanding Common Stock in the quarter.

"In Q1, we beat our revenue and Adjusted EBITDA guidance midpoints," said Jack McDonald, Upland's chairman and chief executive officer. "We continued to drive innovation with 10 key AI initiatives throughout our product portfolio. We are proud of our products' ongoing industry recognition and excited to welcome 21 new major customers this quarter."

First Quarter Business Highlights

• We expanded relationships with 256 existing customers, 29 of which were major expansions. We also welcomed 134 new customers to Upland in the first quarter, including 21 new major customers.
• We earned 44 badges in G2's Spring 2024 market reports across our products. Upland Altify, our sales optimization software, and Upland InterFAX, our cloud-based fax service, are new to receiving badges. The Company's knowledge management solutions, Upland RightAnswers and Upland Panviva, continue to garner various recognitions, while Upland Qvidian, our proposal management and response software, increased its number of Leader badges earned quarter-over-quarter.
• Upland Software was included as a Notable Vendor in Forrester's Customer Solutions Landscape Report for our knowledge management solutions, Panviva and RightAnswers. With the continuous advancements of AI technology, Upland remains committed to enhancing its solutions and guiding organizations through the transformative AI revolution, helping them embrace the future of knowledge management.
• Our product development teams worked diligently to implement 10 AI initiatives across our portfolio. We continue to drive innovation for our customers, including Upland Qvidian's AI-guided proposal automation integrated with IBM watsonx, to Upland Altify's integration with Salesforce for various data extraction, summarization, and auto-generated form response capabilities.

Business Outlook

For the quarter ending June 30, 2024, Upland expects reported total revenue to be between $64.4 and $70.4 million, including subscription and support revenue between $61.5 and $66.5 million, for a decline in total revenue of 10% at the mid-point from the quarter-ended June 30, 2023. Second quarter 2024 Adjusted EBITDA is expected to be between $11.8 and $14.8 million, for an Adjusted EBITDA margin of 20% at the mid-point. This Adjusted EBITDA guide at the mid-point is a decrease of 20% from the quarter-ended June 30, 2023.

For the full year ending December 31, 2024, Upland expects reported total revenue to be between $264.7 and $282.7 million, including subscription and support revenue between $251.6 and $266.6 million, for a decline in total revenue of 8% at the mid-point from the year ended December 31, 2023. Full year 2024 Adjusted EBITDA is expected to be between $50.8 and $59.8 million, for an Adjusted EBITDA margin of 20% at the mid-point. This Adjusted EBITDA guide at the midpoint is a decline of 14% from the year ended December 31, 2023.

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 1-800-715-9871 in North America or 1-646-307-1963 if outside North America, international rates apply. Attendees will need to use access code 8422976 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 Software, Inc. enables global businesses to work smarter with over 25 proven cloud software products that increase revenue, reduce costs, and deliver immediate value. Our solutions cover digital marketing, knowledge management, contact center service, sales productivity, content lifecycle automation, and more. Upland's powerful cloud products are trusted by more than 10,000 global customers. Learn how Upland helps businesses achieve outcomes that matter at 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 depreciation and amortization expense, interest expense, net, other expense (income), net, provision (benefit) for income taxes, stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, purchase accounting adjustments for deferred revenue and impairment of goodwill.

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, impairment of goodwill 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.

In connection with periodic reviews of our business, we have decided to discontinue the availability of certain non-strategic product offerings and a limited number of non-strategic customer contracts (collectively referred to as "Sunset Assets").

Overage Charges are subscription and support revenues earned in addition to contractual minimum customer commitments as a result of the usage volume of services including text and e-mail messaging and third-party pass-through costs that exceed the levels stipulated in contracts with the Company.

Upland defines Core Organic Growth Rate as the percentage change between two reported periods in subscription and support revenue, excluding subscription and support revenue from Sunset Assets and Overage Charges. We calculate our year-over-year Core Organic Growth Rate as though all acquisitions or dispositions closed as of the end of the latest period were closed as of the first day of the prior year period presented. Core Organic Growth Rate does not represent actual organic revenue generated by our business as it stood at the beginning of the respective period.

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 "anticipate," "believe," "may," "will," "continue," "seek," "estimate," "intend," "hope," "predict," "could," "should," "would," "project," "plan," "expect" 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, acquisition expense timing and our ability to consummate and integrate acquisitions; our ability to expand our go to market operations, including our marketing and sales organization and cross selling opportunities, 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, average annual spend, margin expense and operating expenses in future periods; our expectations with regard to revenue from perpetual licenses and professional services; our ability to adapt to macroeconomic factors impacting the global economy, including foreign currency exchange risk, inflation and supply chain constraints; 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, including organic 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; global economic and financial market conditions and uncertainties; 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; impairments to goodwill and other intangible assets; 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; our expectations as to the payment of dividends; our Share Repurchase Plan, including expectations regarding the timing and manner of repurchases made under the Share Repurchase Plan; our current level of indebtedness, including our exposure to variable interest rate risk; the potential elimination or limitation of tax incentives or tax losses and/or reductions of U.S. federal net operating losses; the risk that we did not consider another contingency included in this list; 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,
			2024				2023
		(unaudited)				(unaudited)
Revenue:
Subscription and support		$	67,078			$	72,914
Perpetual license			1,470				1,571
Total product revenue			68,548				74,485
Professional services			2,188				2,571
Total revenue			70,736				77,056
Cost of revenue:
Subscription and support			19,829				23,485
Professional services and other			1,220				2,051
Total cost of revenue			21,049				25,536
Gross profit			49,687				51,520
Operating expenses:
Sales and marketing			17,018				14,289
Research and development			12,455				12,530
General and administrative			13,232				17,189
Depreciation and amortization			11,396				15,094
Acquisition-related expenses			-				1,094
Impairment of goodwill			87,227				128,755
Total operating expenses			141,328				188,951
Loss from operations			(91,641	)			(137,431	)
Other expense:
Interest expense, net			(4,958	)			(5,461	)
Other income (expense), net			(78	)			1,425
Total other expense			(5,036	)			(4,036	)
Loss before benefit from income taxes			(96,677	)			(141,467	)
Benefit from income taxes			547				1,422
Net loss		$	(96,130	)		$	(140,045	)
Preferred stock dividends			(1,375	)			(1,315	)
Net loss attributable to common stockholders		$	(97,505	)		$	(141,360	)
Net income (loss) per common share:
Net loss per common share, basic and diluted		$	(3.37	)		$	(4.38	)
Weighted-average common shares outstanding, basic and diluted			28,917,897				32,259,110

Upland Software, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
		March 31,				December 31,
			2024				2023
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	231,614			$	236,559
Accounts receivable, net of allowance			29,253				38,765
Deferred commissions, current			9,678				10,429
Unbilled receivables			3,213				2,701
Income tax receivable, current			5,221				3,775
Prepaid expenses and other current assets			10,215				8,004
Total current assets			289,194				300,233
Tax credits receivable			1,553				1,657
Property and equipment, net			1,803				1,932
Operating lease right-of-use asset			2,480				2,929
Intangible assets, net			166,988				182,349
Goodwill			264,012				353,778
Deferred commissions, noncurrent			12,593				12,568
Interest rate swap assets			15,889				14,270
Other assets			434				308
Total assets		$	754,946			$	870,024
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	4,642			$	8,137
Accrued compensation			7,083				7,174
Accrued expenses and other current liabilities			6,770				7,050
Deferred revenue			99,550				102,763
Operating lease liabilities, current			2,073				2,351
Current maturities of notes payable			3,257				3,172
Total current liabilities			123,375				130,647
Notes payable, less current maturities			472,642				473,502
Deferred revenue, noncurrent			3,428				3,860
Operating lease liabilities, noncurrent			1,224				1,597
Noncurrent deferred tax liability, net			14,696				16,025
Other long-term liabilities			447				461
Total liabilities			615,812				626,092
Series A Convertible Preferred stock			119,013				117,638
Stockholders' equity:
Common stock			3				3
Additional paid-in capital			602,813				608,995
Accumulated other comprehensive loss			2,307				6,168
Accumulated deficit			(585,002	)			(488,872	)
Total stockholders' equity			20,121				126,294
Total liabilities, convertible preferred stock and stockholders' equity		$	754,946			$	870,024

Upland Software, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
		Three Months Ended March 31,
			2024				2023
		(unaudited)				(unaudited)
Operating activities
Net loss		$	(96,130	)		$	(140,045	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			13,802				18,500
Deferred income taxes			(1,057	)			(1,975	)
Amortization of deferred costs			3,047				3,352
Foreign currency re-measurement loss			(164	)			(859	)
Non-cash interest, net and other income, net			(882	)			573
Non-cash stock-based compensation expense			3,522				6,462
Non-cash loss on impairment of goodwill			87,227				128,755
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable			9,361				6,991
Prepaid expenses and other current assets			(4,117	)			(2,362	)
Other assets			(2,608	)			(2,483	)
Accounts payable			(3,459	)			(184	)
Accrued expenses and other liabilities			(389	)			(859	)
Deferred revenue			(3,032	)			(41	)
Net cash provided by operating activities			5,121				15,825
Investing activities
Purchase of property and equipment			(183	)			(215	)
Net cash used in investing activities			(183	)			(215	)
Financing activities
Payments of debt costs			-				(130	)
Payments on notes payable			(1,350	)			(1,350	)
Stock repurchases and retirement			(7,918	)			-
Taxes paid related to net share settlement of equity awards			(331	)			(235	)
Additional consideration paid to sellers of businesses			-				(5,066	)
Net cash used in financing activities			(9,599	)			(6,781	)
Effect of exchange rate fluctuations on cash			(284	)			238
Change in cash and cash equivalents			(4,945	)			9,067
Cash and cash equivalents, beginning of period			236,559				248,653
Cash and cash equivalents, end of period		$	231,614			$	257,720
Supplemental disclosures of cash flow information:
Cash paid for interest, net of interest rate swaps		$	8,720			$	7,134
Cash paid for taxes		$	2,114			$	2,507

Upland Software, Inc.
Reconciliation of Adjusted EBITDA
(in thousands, unaudited)
		Three Months Ended March 31,
			2024				2023
Reconciliation of Net Loss to Adjusted EBITDA:
Net loss		$	(96,130	)		$	(140,045	)
Add:
Depreciation and amortization expense			13,802				18,500
Interest expense, net			4,958				5,461
Other expense (income), net			78				(1,425	)
Benefit from income taxes			(547	)			(1,422	)
Stock-based compensation expense			3,522				6,462
Acquisition-related expense			-				1,086
Non-recurring litigation costs			118				-
Purchase accounting deferred revenue discount			75				228
Impairment of goodwill			87,227				128,755
Adjusted EBITDA		$	13,103			$	17,600

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,
			2024				2023
Reconciliation of net loss to non-GAAP net income:
Net loss		$	(96,130	)		$	(140,045	)
Add:
Stock-based compensation expense			3,522				6,462
Amortization of purchased intangibles			13,510				18,170
Amortization of debt discount			575				573
Acquisition-related expense			-				1,086
Nonrecurring litigation expense			118				-
Purchase accounting deferred revenue discount			75				228
Impairment of goodwill			87,227				128,755
Tax effect of adjustments above			(2,049	)			(4,253	)
Non-GAAP net income		$	6,848			$	10,976
Weighted average common shares outstanding, basic			28,917,897				32,259,110
Weighted average common shares outstanding, diluted			35,956,683				38,979,587
Non-GAAP earnings per share, basic		$	0.24			$	0.34
Non-GAAP earnings per share, diluted		$	0.19			$	0.28

Upland Software, Inc.
Reconciliation of Operating Cash Flow to Free Cash Flow
(in thousands, unaudited)
		Three Months Ended March 31,
			2024				2023
Reconciliation of operating cash flow to Free Cash Flow:
Net cash provided by operating activities		$	5,121			$	15,825
Less: Purchase of property and equipment			(183	)			(215	)
Free Cash Flow		$	4,938			$	15,610

Upland Software, Inc.
Supplemental Financial Information
(in thousands, unaudited)
		Three Months Ended March 31,
			2024			2023
Stock-based compensation:
Cost of revenue		$	186		$	302
Research and development			606			655
Sales and marketing			397			576
General and administrative			2,333			4,929
Total		$	3,522		$	6,462

		Three Months Ended March 31,
			2024			2023
Depreciation:
Cost of revenue		$	-		$	2
Operating expense			292			328
Total		$	292		$	330
Amortization:
Cost of revenue		$	2,406		$	3,404
Operating expense			11,104			14,766
Total		$	13,510		$	18,170

Contacts

Investor Relations Contact:
Michael D. Hill
[e-mail]
512-960-1031

Media Contact:
Lloyd Berry
[e-mail]
512-960-1010