Upland Software Reports Third Quarter 2018 Financial Results

PRNewswire 8-Nov-2018 4:10 PM

AUSTIN, Texas, Nov. 8, 2018 /PRNewswire/ -- Upland Software, Inc. (NASDAQ:UPLD), a leader in cloud-based Enterprise Work Management software, today announced financial and operating results for the third quarter of 2018 and provided guidance for its fourth quarter and full year of 2018.

Third Quarter 2018 Financial Highlights

  • Total revenue was $37.1 million, an increase of 42% from $26.1 million in the third quarter of 2017.
  • Subscription and support revenue was $33.9 million, an increase of 46% from $23.2 million in the third quarter of 2017.
  • GAAP net loss was $4.3 million, an increase of 21% from a GAAP net loss of $3.5 million, in the third quarter of 2017.
  • Adjusted EBITDA was $13.1 million, or 35% of total revenue, an increase of 57% from $8.3 million, or 32% of total revenue, in the third quarter of 2017.
  • Cash on hand as of the end of the third quarter was $16.1 million.

"Q3 was another record quarter with strong revenue growth, record Adjusted EBITDA, and a host of significant product enhancements that demonstrate our commitment to customer-driven innovation," said Jack McDonald, chairman and CEO of Upland Software. "And just after quarter close, we announced our largest acquisition to date of Rant & Rave, a leading customer engagement platform and strategic addition to our product portfolio, which added meaningful cross-selling opportunities in the United States and Europe. Our Q4 and full-year guidance is strong, our M&A pipeline is robust, and we are actively pursuing additional strategic acquisition opportunities."

Third Quarter Business Highlights

  • Expanded 208 existing customer relationships, including 17 major expansions, and added 130 new customer relationships, including 12 major accounts.
  • Enhanced our Workflow Automation product family by delivering improved user experience for our RFP and sales proposal automation solution, and introduced new capabilities for reporting and analyzing data.
  • Released several updates within our Digital Engagement product family incorporating customer-requested enhancements delivering usability improvements and performance upgrades to the mobile messaging platform.
  • Improved user experience within our Project and IT Management product family in our PPM and PSA solutions; improved visualization, budgeting and charge back capabilities in our ITFM solution; improved planning capabilities in our supply chain management solution; and added integration with Office 365 SharePoint to our knowledge management solution.
  • Delivered a major user experience upgrade, along with customer-requested enhancements for Upland Analytics, our reporting platform powered by Upland's ComSci ITFM application, and integrated with Tenrox, Upland's professional services automation (PSA) solution.
  • Just after quarter close, on October 3, 2018, strengthened our Upland Mobile Messaging (UMM) platform by acquiring Rant & Rave, a leading provider of cloud-based customer engagement solutions including voice of customer (VoC) and voice of employee (VoE) applications that enable users to capture, analyze, and act on real-time customer and employee feedback across multiple channels including Short Message Service (SMS), mobile email, web, and social media.

Business Outlook

For the quarter ending December 31, 2018, Upland expects reported total revenue to be between $41.8 and $43.8 million, including subscription and support revenue between $38.8 and $40.0 million, for growth in recurring revenue of 59% at the mid-point over the quarter-ended December 31, 2017. Third quarter 2018 Adjusted EBITDA is expected to be between $15.3 and $16.1 million, for an Adjusted EBITDA margin of roughly 37% at the mid-point, representing growth of 61% at the mid-point over the quarter-ended December 31, 2017.

For the full year ending December 31, 2018, Upland expects reported total revenue to be between $146.5 and $148.5 million, including subscription and support revenue between $133.6 and $134.8 million, for growth in recurring revenue of 57% at the mid-point over the year ended December 31, 2017. Full year 2018 Adjusted EBITDA is expected to be between $51.7 and $52.5 million, for an Adjusted EBITDA margin of 35% at the mid-point, representing growth of 72% at the mid-point over the year ended December 31, 2017.

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 conference call may be accessed within North America by dialing 1.888.684.7501 and outside of North America by dialing 1.925.418.7884, referencing conference code 1378270. The conference call will be simultaneously webcast on Upland's investor relations website, which can be accessed at investor.uplandsoftware.com. This webcast will contain forward-looking statements and other material information regarding Upland's financial and operating results.

Following completion of the live call, a recorded replay of the webcast will be available on Upland's website at investor.uplandsoftware.com for twelve months.

About Upland Software

Upland Software (NASDAQ:UPLD) is a leading provider of cloud-based Enterprise Work Management software. Our family of applications enables users to manage their projects, professional workforce and IT investments; automate document-intensive business processes; and effectively engage with their customers, prospects and community via the web and mobile technologies. With more than 4,000 customers and over 450,000 users around the world, Upland Software solutions help customers run their operations smoothly, adapt to change quickly, and achieve better results every day. 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, nonrecurring litigation expenses, purchase accounting adjustments for deferred revenue, and the related tax effect of the adjustments above.

Upland defines annual net dollar retention rate as of December 31 as the aggregate annualized recurring revenue value at December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate annualized recurring revenue value from all customers as of December 31 of the prior fiscal year. This measure excludes the revenue value of uncontracted overage fees and on-demand service fees.

Upland defines major accounts as accounts with greater than or equal to $25,000 in annual recurring revenue.

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.

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

Media Contact:
Christina Turner
Media@uplandsoftware.com
855-944-7526

 

Upland Software, Inc.

Condensed Consolidated Statements of Operations

(in thousands, unaudited, except per share data)



Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Revenue:








Subscription and support

$

33,919



$

23,169



$

94,802



$

60,711


Perpetual license

915



856



3,224



3,296


Total product revenue

34,834



24,025



98,026



64,007


Professional services

2,310



2,047



6,679



6,098


Total revenue

37,144



26,072



104,705



70,105


Cost of revenue:








Subscription and support

10,566



7,737



29,395



20,306


Professional services

1,517



1,376



4,182



3,838


Total cost of revenue

12,083



9,113



33,577



24,144


Gross profit

25,061



16,959



71,128



45,961


Operating expenses:








Sales and marketing

5,299



4,258



14,955



11,516


Research and development

5,400



4,092



15,577



11,572


Refundable Canadian tax credits

(99)



(195)



(404)



(424)


General and administrative

8,011



5,084



23,475



17,564


Depreciation and amortization

3,606



1,648



9,589



4,111


Acquisition-related expenses

2,497



4,399



8,739



10,368


Total operating expenses

24,714



19,286



71,931



54,707


Gain/(loss) from operations

347



(2,327)



(803)



(8,746)


Other expense:








Interest expense, net

(3,118)



(2,277)



(8,755)



(4,372)


Loss on debt extinguishment



1,634






Other income (expense), net

(744)



(130)



(965)



(260)


Total other expense

(3,862)



(773)



(9,720)



(4,632)


Loss before provision for income taxes

(3,515)



(3,100)



(10,523)



(13,378)


Provision for income taxes

(735)



(406)



(2,118)



(1,553)


Net loss

$

(4,250)



$

(3,506)



$

(12,641)



$

(14,931)


Net loss per common share:








Net loss per common share, basic and diluted

$

(0.21)



$

(0.18)



$

(0.63)



$

(0.83)


Weighted-average common shares outstanding, basic and
    diluted

20,089,919



19,380,519



19,916,907



18,043,365


 

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)






September 30,


December 31,


2018


2017


(unaudited)



Assets




Current assets:




Cash and cash equivalents

$

16,089



$

22,326


Accounts receivable, net of allowance

26,440



26,504


Deferred commissions, current

2,374




Prepaid and other

3,890



2,856


Total current assets

48,793



51,686


Canadian tax credits receivable

1,637



1,196


Property and equipment, net

2,206



2,927


Intangible assets, net

112,156



70,043


Goodwill

157,078



154,607


Deferred commissions, noncurrent

5,470




Other assets

153



800


Total assets

$

327,493



$

281,259


Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

4,139



$

3,887


Accrued compensation

3,048



5,157


Accrued expenses and other

10,168



12,148


Deferred revenue

43,575



43,807


Due to sellers

10,655



7,839


Current maturities of notes payable

4,330



2,301


Total current liabilities

75,915



75,139


Notes payable, less current maturities

153,898



108,843


Deferred revenue, noncurrent

901



1,570


Noncurrent deferred tax liability, net

6,808



3,262


Other long-term liabilities

736



1,030


Total liabilities

238,258



189,844


Stockholders' equity:




Common stock

2



2


Additional paid-in capital

181,540



174,944


Accumulated other comprehensive loss

(4,830)



(2,403)


Accumulated deficit

(87,477)



(81,128)


Total stockholders' equity

89,235



91,415


Total liabilities and stockholders' equity

$

327,493



$

281,259


 

 

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)






Nine Months Ended September 30,


2018


2017


(unaudited)


(unaudited)

Operating activities




Net loss

$

(12,641)



$

(14,931)


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




Depreciation and amortization

14,604



8,112


Deferred income taxes

421



698


Amortization of deferred commissions

1,709




Foreign currency re-measurement (gain) loss

105



(422)


Non-cash interest and other expense

616



416


Non-cash stock compensation expense

10,380



7,804


Non-cash loss on retirement of fixed assets



(18)


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




Accounts receivable

3,173



753


Prepaids and other

(3,115)



1,664


Accounts payable

(679)



1,736


Accrued expenses and other liabilities

(7,097)



789


Deferred revenue

(2,679)



(793)


Net cash provided by operating activities

4,797



5,808


Investing activities




Purchase of property and equipment

(643)



(443)


Purchase business combinations, net of cash acquired

(47,850)



(61,163)


Net cash used in investing activities

(48,493)



(61,606)


Financing activities




Payments on capital leases

(893)



(1,098)


Proceeds from notes payable, net of issuance costs

49,375



54,683


Payments on notes payable

(2,907)



(11,319)


Taxes paid related to net share settlement of equity awards

(4,642)



(628)


Issuance of common stock, net of issuance costs

858



43,257


Additional consideration paid to sellers of businesses

(4,294)



(5,361)


Net cash provided by financing activities

37,497



79,534


Effect of exchange rate fluctuations on cash

(38)



482


Change in cash and cash equivalents

(6,237)



24,218


Cash and cash equivalents, beginning of period

22,326



28,758


Cash and cash equivalents, end of period

$

16,089



$

52,976


Supplemental disclosures of cash flow information:




Cash paid for interest

$

8,170



$

3,966


Cash paid for taxes

$

2,480



$

1,463


Noncash investing and financing activities:




Equipment acquired pursuant to capital lease obligations

$



$

121


 

 

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)






Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Reconciliation of Net loss to Adjusted EBITDA:








Net Loss

$

(4,250)



$

(3,506)



$

(12,641)



$

(14,931)


Add:








Depreciation and amortization expense

5,387



3,066



14,604



8,112


Interest expense, net

3,118



2,277



8,755



4,372


Other expense, net

744



130



965



260


Loss on debt extinguishment



(1,634)






Provision for income taxes

735



406



2,118



1,553


Stock-based compensation expense

3,781



1,884



10,380



7,804


Acquisition-related expense

2,497



4,399



8,739



10,368


Purchase accounting deferred revenue discount

1,052



1,294



3,470



3,032


Adjusted EBITDA

$

13,064



$

8,316



$

36,390



$

20,570




Upland Software, Inc.

Reconciliation of Non-GAAP Net Income (Loss) and Non-GAAP Diluted EPS

(in thousands, unaudited, except share and per share data)






Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Reconciliation of Net Loss to Non-GAAP net income (loss):








Net loss

$

(4,250)



$

(3,506)



$

(12,641)



$

(14,931)


Add:








Stock-based compensation expense

3,781



1,884



10,380



7,804


Amortization of purchased intangibles

4,844



2,493



12,945



6,285


Amortization of debt discount

212



296



616



416


Acquisition-related expense

2,497



4,399



8,739



10,368


Loss on debt extinguishment



(1,634)






Purchase accounting deferred revenue discount

1,052



1,294



3,470



3,032


Tax effect of adjustments above

(59)



(84)



(135)



(242)


Non-GAAP net income

$

8,077



$

5,142



$

23,374



$

12,732










Weighted average ordinary shares outstanding, basic

20,089,919



19,380,519



19,916,907



18,043,365


Weighted average ordinary shares outstanding, diluted

21,152,333



20,633,820



20,937,223



19,169,180


Non-GAAP earnings per share, basic

$

0.40



$

0.27



$

1.17



$

0.71


Non-GAAP earnings per share, diluted

$

0.38



$

0.25



$

1.12



$

0.66


 

 

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)






Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Stock-based compensation:








Cost of revenue

$

195



$

147



$

464



$

277


Research and development

383



219



871



560


Sales and marketing

169



73



368



149


General and administrative

3,034



1,445



8,677



6,818


Total

$

3,781



$

1,884



$

10,380



$

7,804















Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Depreciation:








Cost of revenue

$

406



$

443



$

1,269



$

1,461


Operating expense

137



130



390



366


Total

$

543



$

573



$

1,659



$

1,827










Amortization:








Cost of revenue

$

1,375



$

975



$

3,746



$

2,540


Operating expense

3,469



1,518



9,199



3,745


Total

$

4,844



$

2,493



$

12,945



$

6,285


 

Upland Software, Inc. (PRNewsfoto/Upland Software, Inc.)

 

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