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Upland Software Reports Fourth Quarter and Full Year 2019 Financial Results

Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based enterprise work management software, today announced financial and operating results for the fourth quarter and full year of 2019 and reaffirmed guidance for its first quarter and full year of 2020.

Fourth Quarter 2019 Financial Highlights

  • Total revenue was $66.1 million, an increase of 46% from $45.2 million in the fourth quarter of 2018.
  • Subscription and support revenue was $59.1 million, an increase of 41% from $41.8 million in the fourth quarter of 2018.
  • GAAP net loss was $19.9 million, or a loss of $0.80 cents per share, compared to a GAAP net income of $1.8 million, or a gain of $0.09 cents per share, in the fourth quarter of 2018, driven by a one-time non-cash tax benefit.
  • Adjusted EBITDA was $25.0 million, or 38% of total revenue, an increase of 49% from $16.7 million, or 37% of total revenue, in the fourth quarter of 2018.
  • Cash on hand as of the end of the fourth quarter was $175.0 million.
  • Our credit facility was expanded to $600 million to provide additional capital for growth.

Full Year 2019 Financial Highlights

  • Total revenue was $222.6 million, an increase of 49% from $149.9 million in 2018.
  • Subscription and support revenue was $203.9 million, an increase of 49% from $136.6 million in 2018.
  • GAAP net loss was $45.4 million, or a loss of $1.96 per share, compared to a GAAP net loss of $10.8 million, or a loss of $0.54 cents per share, in 2018.
  • Adjusted EBITDA was $82.5 million, or 37% of total revenue, an increase of 55% from $53.1 million, or 35% of total revenue, in 2018.

“Q4 was an impressive finish to a transformational year marked by strong revenue growth, expanding margins, market leading product innovation, and record acquisition activity,” said Jack McDonald, chairman and CEO of Upland Software. “As our strong guidance indicates, we are positioned for a great 2020 with four compelling enterprise clouds, proven new go-to-market leadership, and a robust acquisition pipeline," he added.

Fourth Quarter Business Highlights

  • Posted a strong 97% net dollar retention rate, further evidence that our UplandOne platform continues to drive customer loyalty.
  • Expanded 255 existing customer relationships, including 51 major expansions, and added 145 new customer relationships, including 44 major accounts. For the full year 2019, expanded 927 existing customer relationships, including 147 major expansions and added 475 new customer relationships, including 132 major accounts.
  • Continued to invest in customer-driven innovation across our four cloud offerings. We added call center and ServiceNow integrations to our Customer Experience Management (CXM) Cloud. We added customer revenue optimization to our Enterprise Sales and Marketing (ESM) Cloud through the acquisition of Altify. Our Project and IT Management (PITM) Cloud added integration to Google cloud usage data to better track cloud vs. on-premise cost structures. We added intelligent capture to our Document Workflow (DW) Cloud to provide an onramp to the cloud for organizations that require flexible deployment solutions.
  • Closed two strategic and accretive acquisitions that together added $33 million in total revenue and $15 million in Adjusted EBITDA. After the close of the quarter, closed the acquisition of Localytics, expanding mobile application personalization and analytics solutions within our CXM Cloud.
  • Continued to scale our go-to-market capabilities by expanding sales team capacity, and, after the end of the quarter, announcing the appointment of software industry veteran Rod Favaron as President and Chief Commercial Officer, along with a proven team of new executives to lead marketing, customer success, and global account sales.

Business Outlook

For the quarter ending March 31, 2020, Upland expects reported total revenue to be between $62.8 and $65.8 million, including subscription and support revenue between $58.8 and $61.2 million, for growth in recurring revenue of 33% at the mid-point over the quarter-ended March 31, 2019. First quarter 2020 Adjusted EBITDA is expected to be between $23.1 and $24.5 million, for an Adjusted EBITDA margin of 37% at the mid-point, representing growth of 34% at the mid-point over the quarter-ended March 31, 2019.

For the full year ending December 31, 2020, Upland expects reported total revenue to be between $269.5 and $281.5 million, including subscription and support revenue between $252.6 and $262.2 million, for growth in recurring revenue of 26% at the mid-point over the year ended December 31, 2019. Full year 2020 Adjusted EBITDA is expected to be between $99.2 and $104.8 million, for an Adjusted EBITDA margin of 37% at the mid-point, representing growth of 24% 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 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 6696654. 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 leader in enterprise work management software. Upland provides four enterprise clouds that enable more than one million worldwide users across 9,000 organizations to orchestrate digital customer experiences, optimize sales team performance, manage projects and IT costs, and automate critical document workflows. All of Upland’s clouds are 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 annual net dollar retention rate (NDRR) 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.

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 December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

(unaudited)

(unaudited)

Revenue:

Subscription and support

$

59,109

$

41,776

$

203,866

$

136,578

Perpetual license

3,531

678

5,738

3,902

Total product revenue

62,640

42,454

209,604

140,480

Professional services

3,426

2,726

13,033

9,405

Total revenue

66,066

45,180

222,637

149,885

Cost of revenue:

Subscription and support

18,891

13,486

61,465

42,881

Professional services

2,182

1,526

7,652

5,708

Total cost of revenue

21,073

15,012

69,117

48,589

Gross profit

44,993

30,168

153,520

101,296

Operating expenses:

Sales and marketing

11,490

5,980

35,170

20,935

Research and development

8,548

5,743

29,388

21,320

Refundable Canadian tax credits

(47

)

(2

)

(351

)

(406

)

General and administrative

13,845

8,566

48,077

32,041

Depreciation and amortization

8,455

4,683

25,885

14,272

Acquisition-related expenses

15,213

9,989

39,657

18,728

Total operating expenses

57,504

34,959

177,826

106,890

Loss from operations

(12,511

)

(4,791

)

(24,306

)

(5,594

)

Other expense:

Interest expense, net

(6,434

)

(4,518

)

(22,313

)

(13,273

)

Loss on debt extinguishment

(2,317

)

Other expense, net

(1,559

)

(816

)

(3,240

)

(1,781

)

Total other expense

(7,993

)

(5,334

)

(27,870

)

(15,054

)

Loss before provision for income taxes

(20,504

)

(10,125

)

(52,176

)

(20,648

)

Benefit from (provision for) income taxes

639

11,927

6,805

9,809

Net loss

$

(19,865

)

$

1,802

$

(45,371

)

$

(10,839

)

Net income (loss) per common share:

Basic

$

(0.80

)

$

0.09

$

(1.96

)

$

(0.54

)

Weighted average common shares outstanding:

Basic

24,726,132

20,191,390

23,099,549

19,985,528

 

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

December 31,

December 31,

2019

2018

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

175,024

$

16,738

Accounts receivable, net of allowance

50,938

40,841

Deferred commissions, current

3,059

2,633

Unbilled receivables

5,111

3,694

Prepaid and other

5,121

3,382

Total current assets

239,253

67,288

Canadian tax credits receivable

5,052

1,573

Property and equipment, net

3,917

2,827

Operating lease right-of-use asset

8,056

Intangible assets, net

282,727

179,572

Goodwill

346,134

225,322

Deferred commissions, noncurrent

8,763

6,292

Other assets

4,165

324

Total assets

$

898,067

$

483,198

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

5,904

$

3,494

Accrued compensation

11,559

6,581

Accrued expenses and other current liabilities

15,717

16,666

Deferred revenue

76,558

57,626

Due to sellers

14,276

17,267

Operating lease liabilities, current

2,533

Current maturities of notes payable

3,193

6,015

Total current liabilities

129,740

107,649

Notes payable, less current maturities

521,881

273,713

Deferred revenue, noncurrent

496

578

Operating lease liabilities, noncurrent

5,862

Noncurrent deferred tax liability, net

26,551

13,311

Other long-term liabilities

676

640

Total liabilities

685,206

395,891

Stockholders’ equity:

Common stock

3

2

Additional paid-in capital

345,127

180,481

Accumulated other comprehensive loss

(1,223

)

(7,501

)

Accumulated deficit

(131,046

)

(85,675

)

Total stockholders’ equity

212,861

87,307

Total liabilities and stockholders’ equity

$

898,067

$

483,198

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Twelve Months Ended December 31,

2019

2018

(unaudited)

Operating activities

Net loss

$

(45,371

)

$

(10,839

)

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

Depreciation and amortization

34,621

21,347

Deferred income taxes

(9,432

)

268

Amortization of deferred costs

3,476

2,367

Foreign currency re-measurement loss

58

305

Non-cash interest and other expense

1,398

874

Non-cash stock compensation expense

25,754

14,130

Non-cash loss on divestiture of assets

1,988

Non-cash loss on debt extinguishment

2,317

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

Accounts receivable

3,160

(5,212

)

Prepaids and other

(5,532

)

(2,798

)

Accounts payable

(73

)

(3,399

)

Accrued expenses and other liabilities

(4,153

)

(17,615

)

Deferred revenue

3,865

7,919

Net cash provided by operating activities

12,076

7,347

Investing activities

Purchase of property and equipment

(1,040

)

(935

)

Purchase of customer relationships

(696

)

Purchase business combinations, net of cash acquired

(216,025

)

(160,751

)

Net cash used in investing activities

(217,761

)

(161,686

)

Financing activities

Payments on finance leases

(529

)

(1,136

)

Proceeds from notes payable, net of issuance costs

625,666

172,397

Payments on notes payable

(383,568

)

(4,689

)

Taxes paid related to net share settlement of equity awards

(12,659

)

(9,400

)

Issuance of common stock, net of issuance costs

151,551

807

Additional consideration paid to sellers of businesses

(16,693

)

(8,056

)

Net cash provided by financing activities

363,768

149,923

Effect of exchange rate fluctuations on cash

203

(1,172

)

Change in cash and cash equivalents

158,286

(5,588

)

Cash and cash equivalents, beginning of period

16,738

22,326

Cash and cash equivalents, end of period

$

175,024

$

16,738

Supplemental disclosures of cash flow information:

Cash paid for interest, net of interest rate swaps

$

23,862

$

12,429

Cash paid for taxes

$

3,557

$

3,348

Sales commissions paid, net of amortization of deferred commissions

$

5,119

$

2,408

Noncash investing and financing activities:

Business combination consideration including holdbacks and earnouts

$

16,108

$

17,713

Equipment acquired pursuant to financing lease obligations

$

44

$

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

Reconciliation of net income (loss) to Adjusted EBITDA:

Net loss

$

(19,865

)

$

1,802

$

(45,371

)

$

(10,839

)

Add:

Depreciation and amortization expense

10,899

6,743

34,621

21,347

Interest expense, net

6,434

4,518

22,313

13,273

Other expense (income), net

1,559

816

3,240

1,781

Loss on debt extinguishment

2,317

Provision for income taxes

(639

)

(11,927

)

(6,805

)

(9,809

)

Stock-based compensation expense

7,038

3,750

25,754

14,130

Acquisition-related expense

15,213

9,989

39,657

18,728

Purchase accounting deferred revenue discount

4,336

1,024

6,794

4,494

Adjusted EBITDA

$

24,975

$

16,715

$

82,520

$

53,105

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 December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Reconciliation of net income (loss) to non-GAAP net income:

Net income (loss)

$

(19,865

)

$

1,802

$

(45,371

)

$

(10,839

)

Add:

Net income (loss) from discontinued operations

Stock-based compensation expense

7,038

3,750

25,754

14,130

Amortization of purchased intangibles

10,342

6,151

32,395

19,096

Amortization of debt discount

421

258

1,400

874

Non-cash loss on divestiture of assets

1,988

1,988

Acquisition-related expense

15,213

9,989

39,657

18,728

Loss on debt extinguishment

2,317

Purchase accounting deferred revenue discount

4,336

1,024

6,794

4,494

Provision for Income Tax - nonrecurring

(10,100

)

(10,100

)

Tax effect of adjustments above

(2,409

)

(545

)

(6,213

)

(723

)

Non-GAAP net income

$

17,064

$

12,329

$

58,721

$

35,660

Weighted average ordinary shares outstanding, basic

24,726,132

20,191,390

23,099,549

19,985,528

Weighted average ordinary shares outstanding, diluted

25,465,083

21,099,723

23,906,301

20,975,713

Non-GAAP earnings per share, basic

$

0.69

$

0.61

$

2.54

$

1.78

Non-GAAP earnings per share, diluted

$

0.67

$

0.58

$

2.46

$

1.70

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

Stock-based compensation:

Cost of revenue

$

237

$

190

$

1,000

$

654

Research and development

673

380

2,310

1,250

Sales and marketing

531

165

1,543

533

General and administrative

5,597

3,015

20,901

11,693

Total

$

7,038

$

3,750

$

25,754

$

14,130

 

Three Months Ended December 31,

Twelve Months Ended December 31,

2019

2018

2019

2018

Depreciation:

Cost of revenue

$

118

$

376

$

834

$

1,644

Operating expense

439

216

1,392

607

Total

$

557

$

592

$

2,226

$

2,251

Amortization:

Cost of revenue

$

2,325

$

1,684

$

7,903

$

5,431

Operating expense

8,017

4,467

24,492

13,665

Total

$

10,342

$

6,151

$

32,395

$

19,096

Contacts:

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

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