Upland Software Reports Second Quarter 2020 Financial Results

Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the second quarter of 2020 and raised guidance for its third quarter and full year of 2020.

Second Quarter 2020 Financial Highlights

  • Total revenue was $71.3 million, an increase of 35% from $53.0 million in the second quarter of 2019.
  • Subscription and support revenue was $67.7 million, an increase of 39% from $48.7 million in the second quarter of 2019.
  • GAAP net loss was $14.2 million, or a loss of $0.57 cents per share, compared to a GAAP net loss of $5.4 million, or a loss of $0.24 cents per share, in the second quarter of 2019.
  • Adjusted EBITDA was $23.7 million, or 33% of total revenue, an increase of 24% from $19.1 million, or 36% of total revenue, in the second quarter of 2019.
  • Cash on hand as of the end of the second quarter was $87.9 million.

“Q2 was an outstanding quarter, with significant growth and outperformance on revenue and Adjusted EBITDA,” said Jack McDonald, Upland’s chairman and chief executive officer. “We saw a meaningful bump in usage of the Upland Cloud in the second quarter, with particular strength in CXM across verticals ranging from election-year political campaigns and public advocacy to media and retail,” he added. “As our raised guidance reflects, we see signs of this strength continuing in the second half of the year, while maintaining a conservative stance in our outlook.”

Second Quarter Business Highlights

  • Expanded 241 existing customer relationships, including 50 major expansions, and added 118 new customer relationships, including 34 major accounts.
  • Continued to invest in customer-driven innovation across Upland's cloud solutions with five major releases and 29 feature packs. For example, in our Document Workflow Cloud solution, we introduced the ability for customers to scan documents utilizing the camera on their iOS and Android mobile devices and added additional eSignature options; and in our CXM Cloud solution, we added Twilio support for cloud telephony deployment within Salesforce and Microsoft Dynamics 365.
  • Completed the integrations of our Alitfy, InGenius, and Localytics products onto the UplandOne platform.
  • Continued to invest in our go-to-market initiatives across sales, marketing, and customer success.

Business Outlook

Digital transformation is a strategic imperative for organizations, and Upland is well-positioned with high-impact, mission-critical tools for digital transformation. We are seeing an increase in usage of the Upland Cloud as organizations prioritize proven, rapid time to value solutions that help them succeed in this environment amidst COVID-19.

Our raised guidance reflects the strength we are seeing in our business while factoring in assumptions regarding the potential impacts of COVID-19. This assumes that there will be uncertainty around new business, renewal timing, customer expansion, and customer renewals particularly with customers in industries highly affected by COVID-19. These assumptions are based on information available to us today. Significant variation from these assumptions could cause us to modify our guidance higher or lower.

For the quarter ending September 30, 2020, Upland expects reported total revenue to be between $68.0 and $72.0 million, including subscription and support revenue between $64.9 and $67.9 million, for growth in recurring revenue of 30% at the mid-point over the quarter-ended September 30, 2019. Third quarter 2020 Adjusted EBITDA is expected to be between $22.3 and $24.3 million, for an Adjusted EBITDA margin of 33% at the mid-point, representing growth of 13% at the mid-point over the quarter-ended September 30, 2019.

For the full year ending December 31, 2020, Upland expects reported total revenue to be between $273.3 and $281.3 million, including subscription and support revenue between $259.5 and $265.5 million, for growth in recurring revenue of 29% at the mid-point over the year ended December 31, 2019. Full year 2020 Adjusted EBITDA is expected to be between $92.2 and $96.2 million, for an Adjusted EBITDA margin of 34% at the mid-point, representing growth of 14% at the mid-point over the year ended December 31, 2019.

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 1-833-520-0067 in the United States or +1-236-714-2220 if outside the United States, using the passcode | conference call identification number: 8462847. 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) 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 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, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

(unaudited)

(unaudited)

Revenue:

Subscription and support

$

67,699

$

48,715

$

131,590

$

93,698

Perpetual license

491

575

852

1,232

Total product revenue

68,190

49,290

132,442

94,930

Professional services

3,125

3,723

6,905

6,576

Total revenue

71,315

53,013

139,347

101,506

Cost of revenue:

Subscription and support

21,200

14,622

41,139

27,896

Professional services

2,472

1,961

4,734

3,475

Total cost of revenue

23,672

16,583

45,873

31,371

Gross profit

47,643

36,430

93,474

70,135

Operating expenses:

Sales and marketing

11,820

7,989

22,751

14,971

Research and development

10,488

7,008

19,908

13,406

Refundable Canadian tax credits

(194)

(85)

(496)

(171)

General and administrative

17,655

12,042

34,331

22,036

Depreciation and amortization

9,037

5,744

18,308

11,003

Acquisition-related expenses

5,781

9,264

20,939

16,987

Total operating expenses

54,587

41,962

115,741

78,232

Loss from operations

(6,944)

(5,532)

(22,267)

(8,097)

Other expense:

Interest expense, net

(7,873)

(5,246)

(15,516)

(10,362)

Other expense, net

(15)

(692)

(1,417)

(1,453)

Total other expense

(7,888)

(5,938)

(16,933)

(11,815)

Loss before provision for income taxes

(14,832)

(11,470)

(39,200)

(19,912)

Benefit from income taxes

673

6,101

4,960

6,713

Net loss

$

(14,159)

$

(5,369)

$

(34,240)

$

(13,199)

Net income (loss) per common share:

Basic

$

(0.57)

$

(0.24)

$

(1.37)

$

(0.61)

Weighted average common shares outstanding:

Basic

25,032,996

22,619,805

25,057,715

21,531,216

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2020

2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

87,910

$

175,024

Accounts receivable, net of allowance

48,656

50,938

Deferred commissions, current

4,150

3,059

Unbilled receivables

5,508

5,111

Prepaid and other

6,604

4,748

Total current assets

152,828

238,880

Tax credits receivable

4,378

4,186

Property and equipment, net

3,951

3,917

Operating lease right-of-use asset

13,598

8,056

Intangible assets, net

292,316

282,727

Goodwill

379,486

346,134

Deferred commissions, noncurrent

10,160

8,763

Other assets

2,666

4,165

Total assets

$

859,383

$

896,828

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

1,976

$

5,904

Accrued compensation

5,933

11,559

Accrued expenses and other current liabilities

14,118

15,344

Deferred revenue

81,032

76,558

Due to sellers

5,712

14,276

Operating lease liabilities, current

3,756

2,533

Current maturities of notes payable

3,184

3,193

Total current liabilities

115,711

129,367

Notes payable, less current maturities

520,155

521,881

Deferred revenue, noncurrent

2,244

496

Operating lease liabilities, noncurrent

11,217

5,862

Noncurrent deferred tax liability, net

24,577

25,685

Other long-term liabilities

33,242

676

Total liabilities

707,146

683,967

Stockholders’ equity:

Common stock

3

3

Additional paid-in capital

363,328

345,127

Accumulated other comprehensive loss

(45,700)

(1,223)

Accumulated deficit

(165,394)

(131,046)

Total stockholders’ equity

152,237

212,861

Total liabilities and stockholders’ equity

$

859,383

$

896,828

 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Six Months Ended June 30,

2020

2019

(unaudited)

Operating activities

Net loss

$

(34,240)

$

(13,199)

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

Depreciation and amortization

23,395

15,152

Deferred income taxes

(4,985)

(12,024)

Amortization of deferred costs

1,920

1,735

Foreign currency re-measurement loss

497

(212)

Non-cash interest and other expense

1,108

565

Non-cash stock compensation expense

20,300

11,529

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

Accounts receivable

5,188

8,410

Prepaids and other

(6,743)

2,415

Accounts payable

(6,258)

(483)

Accrued expenses and other liabilities

(7,101)

(5,756)

Deferred revenue

2,415

(2,736)

Net cash provided by (used in) operating activities

(4,504)

5,396

Investing activities

Purchase of property and equipment

(696)

(364)

Purchase of customer relationships

(201)

Purchase business combinations, net of cash acquired

(67,651)

(82,824)

Net cash used in investing activities

(68,548)

(83,188)

Financing activities

Payments on finance leases

(83)

(357)

Proceeds from notes payable, net of issuance costs

(142)

39,339

Payments on notes payable

(2,700)

(13,749)

Taxes paid related to net share settlement of equity awards

(2,140)

(4,811)

Issuance of common stock, net of issuance costs

41

151,535

Additional consideration paid to sellers of businesses

(9,580)

(3,340)

Net cash provided by (used in) financing activities

(14,604)

168,617

Effect of exchange rate fluctuations on cash

542

798

Change in cash and cash equivalents

(87,114)

91,623

Cash and cash equivalents, beginning of period

175,024

16,738

Cash and cash equivalents, end of period

$

87,910

$

108,361

Supplemental disclosures of cash flow information:

Cash paid for interest, net of interest rate swaps

$

14,861

$

10,298

Cash paid for taxes

$

1,260

$

1,691

Sales commissions paid, net of amortization of deferred commissions

$

2,488

$

1,184

Non-cash investing and financing activities:

Business combination consideration including holdbacks and earnouts

$

345

$

5,175

Equipment acquired pursuant to financing lease obligations

$

$

44

 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Reconciliation of net loss to Adjusted EBITDA:

Net loss

$

(14,159)

$

(5,369)

$

(34,240)

$

(13,199)

Add:

Depreciation and amortization expense

11,658

7,765

23,395

15,152

Interest expense, net

7,873

5,246

15,516

10,362

Other expense (income), net

15

692

1,417

1,453

Benefit from income taxes

(673)

(6,101)

(4,960)

(6,713)

Stock-based compensation expense

10,980

6,901

20,300

11,529

Acquisition-related expense

5,781

9,264

20,939

16,987

Purchase accounting deferred revenue discount

2,272

685

5,973

1,282

Adjusted EBITDA

$

23,747

$

19,083

$

48,340

$

36,853

 

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 June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Reconciliation of net loss to non-GAAP net income:

Net income (loss)

$

(14,159)

$

(5,369)

$

(34,240)

$

(13,199)

Add:

Stock-based compensation expense

10,980

6,901

20,300

11,529

Amortization of purchased intangibles

11,160

7,204

22,365

14,041

Amortization of debt discount

556

282

1,108

565

Acquisition-related expense

5,781

9,264

20,939

16,987

Purchase accounting deferred revenue discount

2,272

685

5,973

1,282

Tax effect of adjustments above

(1,440)

(1,037)

(3,308)

(2,728)

Non-GAAP net income

$

15,150

$

17,930

$

33,137

$

28,477

Weighted average ordinary shares outstanding, basic

25,032,996

22,619,805

25,057,715

21,531,216

Weighted average ordinary shares outstanding, diluted

25,419,592

23,622,830

25,470,778

22,360,713

Non-GAAP earnings per share, basic

$

0.61

$

0.79

$

1.32

$

1.32

Non-GAAP earnings per share, diluted

$

0.60

$

0.76

$

1.30

$

1.27

 

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Stock-based compensation:

Cost of revenue

$

570

$

353

$

888

$

513

Research and development

1,019

632

1,634

953

Sales and marketing

898

365

1,447

504

General and administrative

8,493

5,551

16,331

9,559

Total

$

10,980

$

6,901

$

20,300

$

11,529

 

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Depreciation:

Cost of revenue

$

45

$

238

$

116

$

519

Operating expense

453

323

914

592

Total

$

498

$

561

$

1,030

$

1,111

Amortization:

Cost of revenue

$

2,576

$

1,783

$

4,971

$

3,630

Operating expense

8,584

5,421

17,394

10,411

Total

$

11,160

$

7,204

$

22,365

$

14,041

Contacts:

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

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